Montanarchist
08-14-2010, 04:25 AM
This is an excellent blogpost I'd lik to share: http://econlog.econlib.org/archives/2010/07/the_recalculati_2.html
Read the whole thing, it does not take long, but point #12 makes one of the most important points.
12. However, if the old patterns of specialization and trade are not sustainable, the economy faces the Recalculation Problem. New patterns of specialization and trade need to be created. While the economy is creating new patterns even in good times, when it faces a Recalculation Problem it cannot create new patterns rapidly enough to prevent widespread unemployment.
This is what I believe is the essential problem of Keynesianism, and therefore the modern consensus. It is the heterogenity of capital that is completely ignored when talking of "stimulus" and "job creation" etc. Other than that, Kling's theory fits within the keynesian framework quite well.
Read the whole thing, it does not take long, but point #12 makes one of the most important points.
12. However, if the old patterns of specialization and trade are not sustainable, the economy faces the Recalculation Problem. New patterns of specialization and trade need to be created. While the economy is creating new patterns even in good times, when it faces a Recalculation Problem it cannot create new patterns rapidly enough to prevent widespread unemployment.
This is what I believe is the essential problem of Keynesianism, and therefore the modern consensus. It is the heterogenity of capital that is completely ignored when talking of "stimulus" and "job creation" etc. Other than that, Kling's theory fits within the keynesian framework quite well.