tag:blogger.com,1999:blog-1740670447258719504.post3543777268968227099..comments2024-03-18T06:41:03.841-04:00Comments on Facts & other stubborn things: Gnomes Attack!Evanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1740670447258719504.post-68680098465683490772011-09-11T17:06:12.101-04:002011-09-11T17:06:12.101-04:00"Instead, people would need to improvise. Bra..."Instead, people would need to improvise. Brain surgeons might temporarily become manual laborers, and backhoes originally from Houston might be used to plow snow in Detroit."<br /><br /><br />This is ridiculous.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-32808203984747959522011-09-09T15:41:13.690-04:002011-09-09T15:41:13.690-04:00"But if you were to ask me how - given the at..."But if you were to ask me how - given the attack of the gnomes - the economy would respond to a new marginal efficiency of capital, I still think a Keynesian model is going to give you the best answer"<br /><br />Would it be a reasonable assumption that the "best" answer would be a stimulus package to get AD back up again? I believe Bob's point is that that would NOT be the right answer to a situation where the capital structure has got messed up (for whatever reason) where what is needed is a period of readjustment that will only be slowed down by (for example) subsidizing brain surgeons to remain manual laborers for longer in the interests of boosting AD.<br /><br />I think you may be on stronger ground with your statement "Austrians often (always?) wave their hands at the implications of liquidity preference for equilibria below full employment" because I too observe a tendency on the LVMI to see everything as a mis-allocation problem (usually explained by the ABCT) and to ignore other factors such as monetary dis-equilibrium which may make recovery from a "gnome-attack" more complex than just letting the market take its course.Rob R.noreply@blogger.com