Early settlers lose.
Birmingham University blog over at circa1815.tumblr.com
Richard Williamson writes:
Back in November, Karl Smith made the clearest statement I have ever read of the New Keynesian explanation of a recession:
I can’t hammer this home enough. A recession is not when something bad happens. A recession is not when people are poor.
A recession is when markets fail to clear. We have workers without factories and factories without workers. We have cars without drivers and drivers without cars. We have homes without families and families without their own home.
Prices clear markets. If there is a recession, something is wrong with prices.
Right now, unemployment remains at over 8% in the UK while real wages are lower than they were 7 years ago and are continuing to fall. Yes, you read that correctly. Which immediately leads one to ask: on this explanation of a recession as expounded by Karl, how much further do real wages have to fall to eliminate disequilibrium unemployment?