If business cycles were really inevitable, what purpose would macro policy serve?

If equilibrium is compatible with both buyers and sellers intentions, how can it be undesirable?

-- Teresita Lord (tlord@jcu.edu), October 17, 2000

Answers

Well, we hope that we can shrink them and thus make life a little more predictable. And if we are lucky we might be able to fill in the recession troughs without shaving off the peaks.

Just because something is an "equilibrium" doesn't mean that it is good: there may well be better equilibria out there that could also be reached. An equilibrium is a point of stability, not necessarily someplace you want to be.

-- Brad DeLong (delong@econ.berkeley.edu), October 25, 2000.