An economist at a financial firm emails Greg Mankiw an analysis, one paragraph I want to focus on:
Finally, critics like to make remarks that the US has artificially reduced its unemployment rate by putting people in jail, claiming that those people would otherwise be unemployed. First, there is no evidence they would be otherwise unemployed. But more important, secondly, the total institutionalization has not changed. Mental hospitals have been emptied out. Sad to say, many of these mentally ill people are in jail. The point is that the sum of all institutionalization is probably stable. As for comparing the US to Europe, many European countries reduce their unemployment rates by putting the long-term unemployed on disability, so they drop out of the labor force.
This is true. I talked about this graph here:
That is Mental Hospital versus Prison rate from Bernard Harcourt, with the total added together rate (which is the highest rate, of course). There were as many people, as a percent, in mental hospitals during the 1940s than are in prison today. (See here for full discussion.)
It’s worth noting that even back then, African-Americans incarcerated within mental hospitals faced different requirements and expectations to be declared ‘mentally-fit and socially-productive’, as researched in a paper by Matthew Gambino, ‘These strangers within our gates’: race, psychiatry and mental illness among black Americans at St Elizabeths Hospital in Washington, DC, 1900—40.
I have no idea what to make of the above graph. We have more people now, of course, and it isn’t a straight transfer of populations – the mental hospital institutionalization population was older, more female, and more white than the current jail population.