By Frederic S. Lee
Whether it be inflexible prices, wage rates that are too high and sticky, or interest rates that cannot become negative, they all have the common property of disrupting the smooth workings of the price mechanism, thereby causing recessions, preventing economic recovery, and creating unemployment. But what if there is no price mechanism that allocated scarce resources among competing ends? Then the ‘price problem’ would disappear and the causes of recessions and persistent unemployment would be quite different. Ignoring the issue whether scarce resources as defined in mainstream economics exist or not, I am going to interrogate the supposed existence of the price mechanism that lies at the theoretical core of all mainstream explanations of recessions and unemployment.