One Krugman ready or not? Gosh, I seem to recall someone by the name of Paul Krugman, I believe it was, mocking William Greider a few years ago for his naive "fallacy of composition" belief in the possibilty of overproduction. Now I realize that investment and production are not synonyms, but it seems to me that the arguments against the _possibility_ of overproduction would pertain equally to the possibility of overinvestment. "Or, to put it a different way: Productivity growth in one sector can very easily reduce employment in that sector. But to suppose that productivity growth reduces employment in the economy as a whole is a very different matter."
http://web.mit.edu/krugman/www/hotdog.html Paul Krugman wrote, "The key point is that this isn't your father's recession -- it's your grandfather's recession. That is, it isn't your standard postwar recession, engineered by the Federal Reserve to fight inflation, and easily reversed when the Fed loosens the reins. It's a classic overinvestment slump, of a kind that was normal before World War II. And such slumps have always been hard to fight simply by cutting interest rates." Contrasts with: "Here again, however, there is a deeper answer. It is possible for economies to suffer from an overall inadequacy of demand--recessions do happen. However, such slumps are essentially monetary--they come about because people try in the aggregate to hold more cash than there actually is in circulation. (That insight is the essence of Keynesian economics.) And they can usually be cured by issuing more money--full stop, end of story. An overall excess of production capacity (compared to what?) has nothing at all to do with it." Tom Walker 604 255 4812
