ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Even a stopped clock is right twice a day
"As long as aggregate demand remains low, we cannot even tell when pieces are right-side-up. New investments, lines of business, and worker-firm matches that would be highly productive and profitable if capacity utilization and unemployment were at their normal levels are unprofitable now."
So you're both right?
But, he's right first.
Does this even make any sense:
He seems to want to tell a recalculation story, but then invokes low aggregate demand again. Which is it- were the previous patterns of trade always sustainable, and all that need be done is to restore the demand for them that existed before, or were those patterns unsustainable, and that was why the demand showed up short in the first place. I really read this as DeLong's starting to realize that he just might be wrong, but in his usual way is trying to weasel out for himself a new ground to stand on. I really wish Kling had commented on this post.
To make my point a bit more explicit, just take this subsection of that quote:
Isn't this really a case of the cart before the horse? Doesn't it make more sense to write, as Kling might, that when you find those "lines of business" and "worker-firm matches", then capacity utilization and unemployment will return to "normal" levels. Can DeLong, even for a minute, consider the possibility that the previous lines were unsustainable, and cannot be restored, thus capacity utilization and employment levels cannot return to normal levels until the new ones are found. It seems to me that DeLong wants to change his story about what the recession is, but is still wedded to his original solutions.
I really wish Kling had commented on this post