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Part II: The macroeconomics of monetary disequilibrium: Chapter 6: W. H. Hutt on price rigidities and macroeconomic disorder.
| Title: | Part II: The macroeconomics of monetary disequilibrium: Chapter 6: W. H. Hutt on price rigidities and macroeconomic disorder. |
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| Authors: | Horwitz, Steven1 |
| Source: | Microfoundations & Macroeconomics. 2000, p176-202. 27p. |
| Abstract: | This chapter focuses on the works of William H. Hutt on price rigidities and macroeconomic disorder as it relates to Austrian macroeconomics. Hutt's major theoretical goal was to be able to explain the widespread idleness of labor and capital associated with events like the Great Depression. The cornerstone of Hutt's explanation for idleness was a rejection of the aggregative analysis that characterizes most of macroeconomics from Keynes onward. The source of idleness is to be found in pricing errors in the microeconomic market process. Hutt's story of real-side discoordination fits in with the monetary explanations of idleness offered by the Austrians and the monetary disequilibrium theorists in that neither monetary equilibrium nor price flexibility alone is sufficient to prevent pervasive idleness and that both are necessary for truly full employment. The relevance of Hutt is that he persuasively argued that even if monetary equilibrium is maintained, macroeconomic disorder can still occur if prices and wages are inflexible, particularly downward. Because part of what it means for the monetary system to maintain monetary equilibrium through time is that it is facilitating changes in the intertemporal preferences of producers and consumers, monetary equilibrium must be accompanied by the highest degree of price flexibility possible, so that intertemporal prices can adjust appropriately. |
| Subject Terms: | *Prices, *Macroeconomics, *Industrial relations, *Labor, *Capital |
| Geographic Terms: | Austria |
| People: | Hutt, William H. |
| Database: | Business Source Complete |
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