I don’t know how long Arnold Kling has been talking about PSST (Patterns of Sustainable Specialization and Trade). In all that time, he has never given any evidence of it. He always just says “This is the view I want to push”. In contrast, the evidence for downward rigidity in nominal wages is overwhelming. And now his co-blogger finally says that to him. Since Arnold seems to delight in persisting with self-described “wrong beliefs”, maybe that won’t make a lick of difference, but most of those he doesn’t talk about as much as he does PSST.

I favor a much lower time discount rate and more Donner Party austerity than Karl Smith, but ultimately I agree that nothing is sustainable. It’s eventually going to end, almost certainly not very well. We are just going to squeeze whatever juice we can while we can.