Comments on: Is the Flat Tire an AD Shock? http://www.arnoldkling.com/blog/is-the-flat-tire-an-ad-shock/ taking the most charitable view of those who disagree Mon, 21 Dec 2020 14:00:34 +0000 hourly 1 https://wordpress.org/?v=4.0.32 By: unlearningecon http://www.arnoldkling.com/blog/is-the-flat-tire-an-ad-shock/#comment-303694 Mon, 16 Dec 2013 20:29:19 +0000 http://www.arnoldkling.com/blog/?p=2431#comment-303694 Hmm, to me the “flat tyre” analogy seems to suggest that the crisis was random, unexplainable and possibly exogenous (eg a spike in the road). Seems the crisis was a result of endogenous behaviour by people inside and outside the financial sector, and hence is better compared to the engine breaking down because it wasn’t set up correctly, or something.

Or we could just drop the car metaphor. I think the economy is too complex to warrant such a simple analogy.

]]> By: Bryan Willman http://www.arnoldkling.com/blog/is-the-flat-tire-an-ad-shock/#comment-303540 Mon, 16 Dec 2013 18:45:49 +0000 http://www.arnoldkling.com/blog/?p=2431#comment-303540 Carry the analogy a little further. In cars, especially race cars, trying to drive too far, too fast, or too long on a flat or partially flat tire will often cause it to explode, and do serious damage to the car. You can replace the tire, but that doesn’t repair whatever damage befell the car. And the driver may well not be confident for some time.

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