What makes a recession a recession, and something more than a bad harvest, or a re-calculation, is that most goods, and most labour, gets harder to sell and easier to buy. And I really want to call that an excess demand for money. Because it is money we are selling stuff for, and it is money we are buying stuff with. And if I've also got a theory as well, which says that an excess demand for money will cause a drop in output and employment, and an excess supply of goods and labour, that's just icing on the cake.
Arnold Kling also had a recent rant over National Review's web page. Just imagine, then, how thrilled he would be to read an online National Review article that supported Nicks' claim that there was a excess money demand problem behind the recent U.S. recession.
Although Stephen Williamson thinks the idea of "excess demand for money" is a non-starter and a holdover of old Keynesian modes of thought that nobody schooled in modern macroeconomics takes seriously.
ReplyDeleteIncreasingly I wonder if we are just wasting our time with studying macroeconomics at all. We seem to be making zero progress.