Evening Must-Read: Steve Randy Waldmann: Depression Is a Choice

Steve Randy Waldmann: : Depression is a choice: “I enjoyed Matt Yglesias’ suggestion…

…that depressions are merely a technical problem that will go away once the obsolescence of cash eliminates the zero lower bound on interest rates, and Ryan Avent’s rejoinder…. Avent has the better of the argument when he characterizes our current policy impotence as reflecting behavioral rather than technical constraints. We don’t lack for technical means to counter people’s self-defeating impulse to hoard cash and safe financial assets. On the contrary, we have a whole cornucopia of options!… Squabbling… between market monetarists and post-Keynesians and mainstream saltwater economists is an argument over which of many… options would most perfectly address address this not-really-challenging problem…. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives…. The preferences of developed, aging polities… are obvious…. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary…. I am often told that this is absurd because, after all, wouldn’t creditors be better off in a booming economy than in a depressed one?… The revealed preference of the polity is to resist losses for incumbent creditors much more than it is to seek gains…. The policies that might engender a boom are not guaranteed to succeed…. The polity prefers inaction to bearing this risk…