Chapter Ǻ: Macroeconomics and Coordination ȀȃȄCredit contraction may indeed count as a “real,” nonmonetary, factor
in recession; but it still had monetary aspects. Velocity, as already men-
tioned, fell, and for any plausible concept and measure of money used in
the calculation. Income saved from consumption but not devoted to real
investment or to nonmonetary assets was allocated to the one remaining
asset, namely money, narrowly or broadly defined. If there were no such
asset to latch onto, credit contraction could not have occurred, or not in
any familiar way (Cover and HooksȀȈȇȈ).MV=PQ, the familiar tautolog-
ical equation of exchange, remains a useful check on what implies what.ŠŔő Šŕřő őŘőřőŚŠ
Perhaps more so than other schools, Austrian economists emphasize one
banal fact: economic plans and activities stretch out over time. (Dynamic
general-equilibrium theory does formally take account of time in its mod-
els, but not in the way Austrians do.) Ļis is one more reason why price
flexibility cannot keep markets continuously cleared. People cannot do
everything at once; they cannot set all prices at the same time and revise
all of them equally often. Long-term contracts fix some prices; principal
and interest on debt are in the nature of preset prices. A change in the
general level of prices necessarily disrupts previous price relations.
A more general point is that coordination requires intertemporal as
well as interindustry meshing of plans and activities. Roger Garrison
(ȀȈȇȃ,ȁǿǿȀ) identifies the intersection of the “market for time” and the
“market for money” as the subject matter of macroeconomics. Money
is not the only Hayekian “loose joint” in a market system. A merely
loose relation also holds between a definite assortment of capital goods
and the subsequent demand for the corresponding consumer goods. Ļis
looseness permits maladies such as “overinvestment” or “underinvestment”
or “malinvestment.” Once committed to a certain course, people cannot
“instantaneously and costlessly change that commitment; thus the pas-
sage of time and its irreversibility are matters of paramount importance in
understanding economic activity” (LaidlerȀȈȆȄ, p.Ȅ).
A further link between the universals of time and money (so called by
GarrisonȀȈȇȃ,ȁǿǿȀ) is that people hold money to cope with Keynes’s
“dark forces of time and ignorance.” To the extent that they want to
postpone consumption while keeping their options open about the timing
and specific types and amounts of their future consumption and invest-
ment, people hold financial claims, including money. Keeping options