I am not being a wise aleck, I really want to know what DeLong is talking about in the opening of this post when he writes: “If the problem were on the supply side–that we had an excess supply of construction workers–then we would see excess demand for something else. But we don’t.”
Presumably he is riffing on Walras’ Law, but it’s not clear how he’s applying it in this context.
Furthermore, let’s suppose that DeLong is right, and that it is a problem for Arnold Kling and the Austrians, that we don’t see “excess demand” for stuff right now. But then by the same token, why can’t I write this?
If the problem were on the demand side–that we had a deficiency in demand for bridges and roads–then we would see a deficiency in supply for something else. But we don’t. We see overcapacity all over the place.
I think I have a resolution that works–the difference between an excess supply/demand in one particular industry versus all goods except money–but then, I don’t see why DeLong is characterizing his opponents as talking about “the supply side.” It seems instead he should have said, “If this is about sectoral imbalances, then…”
So help me out, you Keynesian fellow travelers.