THE OPTIMUM SOLUTION FOR THE ADJUSTMENT PROBLEM

Abstract

This paper is concerned with the optimum solution for the adjustment problem. It is obvious from the outset that it is much easier to discuss non‐optimum solutions, or the pessimum solution, than to discuss the optimum solution. That remark needs to be qualified, however: there would be no problem, and no need for a solution, if the world were so arranged that adjustment took place painlessly and automatically. The difficulties arise for several reasons, of which the more important are that changes occur that are unforseen and to which adjustment is painful; that the process of political government offers possibilities of palliating or reducing the pain at least in the short run by interfering in one way or another with whatever system of adjustment is generally thought to exist; and that these interferences tend both to create inefficiency in the operation of the economy and to aggravate the adjustment problem by impeding adjustments that might otherwise occur without too much difficulty and by allowing disequilibria to cumulate.

Citation

JOHNSON, H.G. (1974), "THE OPTIMUM SOLUTION FOR THE ADJUSTMENT PROBLEM", Journal of Economic Studies, Vol. 1 No. 1, pp. 17-29. https://doi.org/10.1108/eb008034