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Not quite - liquidity helps prevents recessions. When recessions happen, people (in the aggregate) work less than they otherwise would. Our true source of wea
by finnh 9y ago
Not quite - liquidity helps prevents recessions. When recessions happen, people (in the aggregate) work less than they otherwise would.
Our true source of wealth is our output, which is the product of (work * productivity).
See Krugman’s story about the capitol hill baby-sitting coop:
http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html http://www.slate.com/articles/business/the_dismal_science/19...
- dnautics 9y agoKrugman misidentifies the problem with the co-op. Basically the whole thing is a failure in the exercise of price controls. An arbitrary authority decides on a unit of a resource that shouldn't have fixed value should have fixed value, and his solution is to introduce inflation... I suppose when you have a hammer everything looks like a nail.