Here, I am going to give my views on (a) how the conscious mind and the unconscious mind relate; and (b) the state of the economy today and how it got there. I am going to choose a roundabout approach, based on two dreams. I had these dreams and remembered them while I was in the middle of reading Michael Pollan’s How to Change Your mind. The dreams occurred the night after I wrote the previous post. As of this writing, I am somewhat farther along in the book, but still not finished. My theory of dreams is that they allow the unconscious mind to play with stuff that they have picked up during the day.

1. In the first dream, I watched in shock as a truck backed up at a high rate of speed, turned 90 degrees, and backed into a truck driven by the guy who leads the Tuesday night dance session. His truck had been parked perpendicular to the sidewalk, facing the street, and the other truck smashed into his front end. The session leader was not injured by the collision, but his truck was badly damaged, and he was upset by that.

The things that this dream picked up were, in reverse chronological order:

a) Right before bed, on Facebook I saw a very subtle but clear allusion to an unnecessary personal conflict between two people at the Thursday dance session. That conflict had caused a third person to call the Tuesday session leader to try to get him involved, which was even more unnecessary.

b) Earlier in the evening, I was with my wife when she was shopping for new shoes. This is a very time-consuming process for her, and I struggled, with some success, to remain calm and patient. The salesman not so much. Actually, her first salesman’s shift apparently ended, and she was on her second salesman. He didn’t overtly lose his temper, but I observed that he much preferred a faster pace than what my wife was following. He also complimented me on my patience, which I took to be in part a plea to me to try to speed her up. I knew that if I did that, it would only lead to a decline in marital comity and no shoes being bought. And I could tell that if nobody rushed her, she would actually find suitable shoes, which is not so easy.

c) That morning, I walked to the grocery store. On the way back, I saw a utility truck come down a street, and then without doing anything it backed all the way up that street. When it reached an intersection, it continued backwards, turning 90 degrees onto another street. At that point, it was blocking my way, so I crossed the street to go around the truck. The truck was still sprawled across the intersection when I turned on the next block. Although the truck had moved slowly, its bizarre antics had me worried and I was glad to be out of its range.

So, what the dream did is it put the Tuesday folk dance leader in the truck that was innocently parked and got hit. It put the impatient shoe salesman into the role of driver of the truck going fast. The backwards-turning truck motif came from the utility truck.

I woke up from the dream about midnight, processed it, and then went back to sleep. I had another dream from which I woke up around 5 AM.

2. In the second dream, I was looking at an economics paper. I was supposed to be the discussant of the paper, but I was having a hard time following my notes. I wanted to point out some issues from a standard macroeconomic perspective, concerning whether the equation that related money and interest rates should have money or the interest rate as the endogenous variable. But I also wanted to try to talk about the economy from a PSST perspective, and I was not sure whether it would be appropriate for me to do so in the time allotted.

As I came closer to being awake, I began to think more about the PSST perspective, and then I continued to think about it after I became fully conscious. I believe that this dream was stimulated by the fact that in the morning my wife had asked me my views on how the economy is doing these days, and also I had been considering trying to do a post on that topic. Also, I had noted Kevin Erdmann’s provocative comment on a recent post. I believe that the issue of following my own notes came up because I have been marking passages in Pollan’s book on my tablet without really being sure which passages I am going to want to come back to later. I really cannot tell at this point what in the book I will find enduringly significant and what I won’t.

Anyway, do you want to know what I think of the economy? For those of you new to this blog who have read this far, you should know that I don’t believe in any form of “aggregate demand.” See my book “Specialization and Trade.”

I think that the economy has gradually managed to find new Patterns of Sustainable Specialization and Trade subsequent to the 2008-2009 fiasco. I think that back then there was a sudden political regime shift. The politicians had been telling mortgage lenders, “Don’t you dare turn anyone down for a mortgage.” Then, all of a sudden, as Erdmann put it, “After mid-2008, we effectively made it illegal for two-thirds of the country to get a mortgage.” That sharp change from one regime to another adversely affected many patterns of specialization and trade, some directly and some indirectly. When patterns became unsustainable, unemployment resulted. It took a long time for new patterns to be established. While from the perspective of the unemployment rate the recovery looks complete, I am not sure that if you looked at the employment/population ratio as your indicator it would look as though all the damage has been repaired. And of course, it is new patterns of specialization and trade that have emerged, not the old ones being restored as in the “aggregate demand” story.

In the conventional story, the reduction in unemployment should have been accompanied by higher inflation, although conventional economists differ about which is the endogenous variable. I think of money and the “aggregate price level” as consensual hallucinations. People are used to some prices going up (health insurance, college tuition) and others not going up or even going down. So I don’t presume any connection between inflation and unemployment.