Chapter Ǻ: Macroeconomics and Coordination ȀȂȈpremature to start by supposing that one theory fits all, just as it would
be to expect a single cause of wars or revolutions or electoral landslides.
Macroeconomics is inherently a messier field than micro. Micro describes
straightforward principles that bear on decisionmaking, coordination, and
possible specific distortions of resource allocation. Macro studies what
might go wrong on a large scale. Micro bears an analogy with describing
the structure and functioning of a healthy human body; macro resembles
the study of what might go wrong—diseases and wounds of innumerable
kinds.
Narrative and statistical history has convinced monetarists that most
recessions exhibit a monetary disturbance—a shrinkage of the quantity
of money or, anyway, its downward deviation from a trend that would
accommodate real economic growth without a general fall in prices and
wages. Monetarists can cite ample historical and statistical evidence from
many times and places. It is unnecessary to review this evidence here, but
undue neglect warrants a plug in the list of References for an insightful and
prescient article in the monetarist tradition written by Harry Gunnison
Brown just a few days before Franklin Roosevelt took office at the depths
of the Great Depression inȀȈȂȂ. In articles ofȀȈȇȈandȀȈȈǿ, Christina
and David Romer review recessions evidently caused by monetary policy
in the United States since World War II.
Money is not the only thing, however, conceivably disrupting coordi-
nation. Severe “real” disturbances might overwhelm entrepreneurial efforts
to cope with them. It is instructive to ponder what would happen to total
output if the country’s telephone system (HallȀȈȈȀ, p.ȁȂ) or, more starkly,
if all of its electronic communications and data processing were somehow
to fail for several months.
In historical fact, however, it is implausible to put special blame on
such “real” disturbances for the major recessions and depressions actually
experienced. Instead of being readily attributable to changes in productive
capacity, recessions and depressions exhibit what look like pervasive defi-
ciencies of demand, pervasive difficulties in finding customers and finding
jobs. A “real” theory assuming continuous market equilibrium is especially
hard put to explain eventual macroeconomic recoveries.
Even a real disturbance as great as the shift from war to peace in
ȀȈȃȄ–ȀȈȃȅbrought a surprisingly modest macroeconomic ripple, with low
unemployment despite demobilization. Ļe two oil-price shocks of the
ȀȈȆǿs might count as real causes of recession, but even these had mon-
etary aspects. Ļey not only made old patterns of quantities and relative