The Economics of Adjustment

Andrew Caplin () and John Leahy ()

No 4687, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we argue that many topics in macroeconomics can be viewed as part of the broader theory of the economics of adjustment. We argue that existing approaches to the economics of adjustment take a very narrow view of the role of information. We outline an approach to this topic that stresses the role of learning and information externalities, and discussed through examples how these concerns alter the qualitative nature of the adjustment process. In particular, there appears to be a general bias towards the underprovision of information in a variety of settings which leads to inefficient adjustment.

Date: 1994-03
Note: EFG
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Related works:
Working Paper: The Economics of Adjustment (1993)
Working Paper: The Economic of Adjustment (1993)
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