By Arnold Kling
In Would Keynes Change His Mind?, I suggest that some key elasticities in the economy have changed since Keynes wrote.
Today, the economy is more elastic than it was in the 1930’s. Today’s recession is a far cry from the Great Depression of the 1930’s. Of course, some of this may be due to a difference in the severity of the shocks in the two periods (making that comparison would be a difficult task). And much of it is due to a better policy regime, particularly relative to money and banking. But I believe that some of the credit belongs to the more elastic economy.
For Discussion. The thesis of the essay is that the greater complexity and diversity of the economy has reduced the effectiveness of macroeconomic policy. Does that argument make sense?