The Recalculation Story, Brad DeLong Version

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:

"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."

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:

"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."

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