Right now, I count 34 posts by users. That might well be more content than the original Catallarchy bloggers have created in the last month. We have a rich community of commenters and bloggers now. I think it's fantastic.

Thank you for your contributions. Keep on posting. We try to frontpage a lot of posts, but we can't frontpage them all.

I think you guys try to be perfectionists in posting. Please point out anything interesting in the news, be informal, write something creative. We're pretty laid back here.

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I was actually a fan

I was a fan of the guy back in the nineties, to the point that I sent him an email asking for clarification about this column. That was in a time when you could email pretty much anybody and expect a reply, which I got.

Did you ask him how come he

Did you ask him how come he didn't mention the possibility of floating the value of the coupons to the baby sitting hours, like currency does ?


I remember thinking that there was a problem with the microcosm as a model, which is why I replied, but I don't remember the specifics.

He starts with an analogy, developed by Joan and Richard Sweeney in the February 1977 Journal of Money, Credit, and Banking, between a baby-sitting co-op in Washington, D.C., and a large, complex economy.

In the co-op, people earned one half-hour coupon by providing one half-hour of baby-sitting services. At one point there was too little scrip in circulation. Couples would try to earn more scrip by offering to baby-sit. But there weren't enough other couples wanting to go out, because they didn't want to run down their inventory of coupons, and so there was an excess supply of baby-sitting services. This baby-sitting economy with about 150 couples was in a recession.

As Krugman points out, this situation is analogous to an excess supply of goods in a real economy, and thus, he concludes, it shouldn't be hard for people to accept that a much more complex economy in which millions of good and services are exchanged can suffer from lack of demand. The solution that the baby-sitting co-op finally accepted was to print more coupons, and it worked. This is like printing money to get an economy out of a recession, which also usually works.

But nowhere does Krugman mention that another way to solve a problem of excess supply is to let prices fall. This missing piece is interesting, given that it was explicitly discussed in the article from which Krugman draws the analogy.


Pretty easy to fix

It was and is pretty easy, within the context of the babysitting microcosm, to see Krugman's omission - thus demonstrating the value of it as a microcosm of the economy in recession. That doesn't always happen. Models are as likely as not, maybe more likely than not, to mislead by making the problems of the analysis hard to see.

I wish I had the email. It might very well contain Krugman's acknowledgment of the point. He might actually have it, if he's been preserving his own correspondence. Post-gmail, I have everything I've written to anyone past a certain date.

In a time long passed...

I wrote a post on this topic. I haven't re-read it so I'm not sure if it stands the test of time.