Uncertainty and Liquidity

Last week I pointed to the most important paragraph ever written in macroeconomics. Today's article starts with the most important paragraph in microeconomics. It is from Prices and Quantities, probably the best piece that Arthur Okun ever wrote. He is, after all, one of the most under-appreciated economists of the 20th century. 

Okun’s inspiration for the book was the stagflation era of the 1970s. However, the timeless message in his book has to do with prices, reasons for sticky prices and the relation between price stickiness and money, or liquidity. As a background to his analysis, it is important to remember that mainstream textbooks in microeconomics are filled to the brim with the Walrasian narrative, according to which:

The Most Important Text in Economics

This is the most important paragraph ever written in macroeconomics:

Make Economics Great Again

Economics is one of the most important academic disciplines. It produces knowledge about one of the fundamental components of a civilized society: 

1. the satisfaction of human needs,

2. by means of production and distribution of scarce resources, 

3. subject to fundamental uncertainty. 

Economists hold in their hands - whether they like it or not - the key to prosperity for all mankind. It is their (our) moral duty to explain to our policy makers, and to the general public, the difference between policies that elevate a society out of misery, and policies that hurl it back down again.