January 10, 2009


You will hear Keynesians cry over the “lost output” that results from having unemployment. That is somewhat misleading. The reason we are getting less output from home builders, mortgage securitizers, and auto makers is that we do not want so much from them. Putting them back to work doing stuff people don’t want may produce output in an accounting sense, but in economic terms it is still lost output.

We certainly don’t need many more houses at the moment.

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