HES: Re: DISC--Liquidity trap?

[Kevin Quinn]

I guess I'm not convinced that Krugman is wrong on Keynes and the 
Classics.  What I think is new in Keynes is the notion that unemployment 
could be part of a genuine equilibrium for the economy, and more generally, 
the idea that the economy may have multiple (Pareto-ranked) equilibria. The 
liquidity trap created by bear speculators' uniform conviction that the 
interest rate will take on a certain value (cf. Leijonhufvud's 
interpretation of Keynes) prevents falling prices from correcting the 
problem and so allows unemployment to persist.  There are multiple 
equilibria tied to different (uniform) expectations for the  interest rate.

Kevin Quinn