Leland Yeager

Quotes From

“Essential Properties of the Medium of Exchange” (1968)

• Demand for current output cannot be excessive or deficient unless, at the same time, the opposite is true of the medium of exchange in particular: at not-yet changed levels of income and prices, people must be wanting to hold less or more money than exists.#
• An economywide excess demand for money shows up not as specific frustration in buying money but as dispersed, generalized frustration in selling things and earning incomes.#

“A Cash-Balance Interpretation of Depression” (1956)

• Apparent overproduction in some industries shows not general overproduction but only disharmony between the relative outputs of various industries and the pattern of consumers’ investment preferences. . . . The catch is this: While an excess supply of some things does necessarily mean an excess demand for others, those other things may, unhappily, be money.#

“The Significance of Monetary Disequilibrium” (1986)

• Any particular output thus constitutes demand, either at once or eventually, for other (noncompeting) outputs. Since supply constitutes demand in that sense, any apparent problem of general deficiency of demand traces to impediments to exchange, which discourage producing goods to be exchanged. #
• Price changes tend to correct or forestall the monetary disequilibrium but do not and cannot occur promptly and completely enough to absorb the entire impact of the monetary change and so avoid quantity changes.#
• One cannot consistently both suppose that the price system is a communication mechanism—a device for mobilizing and coordinating knowledge dispersed in millions of separate minds—and also suppose that people already have the knowledge that the system is working to convey.#
• A businessman’s difficulties in finding profitable customers or a worker’s in finding a job are unlikely to trace wholly, and perhaps not even mainly, to his own pricing policy or wage demands.#
• One of the market system’s virtues is that it does not require or impose collective decisions. The dispersion of knowledge and the fact that certain kinds of knowledge can be used effectively only through decentralized decisions coordinated through markets and prices—rather than coordinated in some magically direct way—is one of the hard facts of reality. It forms part of the reason why monetary disturbances can be so pervasively disruptive: they overtax the knowledge-mobilizing and signaling processes of the market.#
• Taking the lead in downward price and wage adjustments is in the nature of a public good, and private incentives to supply public goods are notoriously inadequate.#
• In tackling questions about the long-run effects on prices and outputs of specified changes in wants, resources, technology, and legislation, one may legitimately neglect intervening disequilibrium to get on with the analysis. But when questions of macroeconomics are at issue—essentially, questions concerning disruptions or imperfections or delays in processes working to coordinate the plans and activities of many different people—then attention properly turns to how quickly and smoothly markets respond when disturbed, to transitional stages, and to the frictions of reality.#
• The very fact that no one sees himself as having any appreciable influence over the value of the money unit helps explain the sluggishness of the pressures working to correct a disequilibrium value.#