Arnold Kling responds here, noting my post. My reaction to the response is the same as my reaction to a lot of Kling's talk about PSST - it sounds fine. What I wonder is whether is whether it is an explanation of recessions. Adjustment happens all the time, and we can certainly think of a lot of reasons why substantial adjustment can be discontinuous or halting. We can also think about why people would want to adjust in the middle of a recession - this is a sort of time you cut your losses and reconsider your plans and economize, after all. None of these fairly plausible stories seem to provide an answer for why millions of able-bodied Americans who want to work can't seem to find work. Even with adjustment, it seems like you have to assume something awfully dysfunctional in the market process itself to get that. You need a mechanism. I'm still not sure what Kling's is.
He also compares PSST to Nick Rowe's quasi-monetarism, and he calls Nick a Monetary Walrasian. Those are fightin' words, but actually in the past I have agreed with Kling on this.