By J. Bradford DeLong
BERKELEY – The central insight of macroeconomics is a fact that was known to John Stuart Mill in the first third of the nineteenth century: there can be a large gap between supply and demand for pretty much all currently produced goods and services and types of labour if there is an equally large excess demand for financial assets. And this fundamental fact is a source of big trouble.
A normal gap between supply and demand for some subset of currently produced commodities is not a serious problem, because it is balanced by