Phelp’s response is very strange. He writes: “If solid old-economy investments were being crowded out in the late 1990s, corporate interest rates net of inflation would have been elevated, which they were not.” Well, they would have been elevated, unless, of course, someone in the economy was artificially holding rates down, heh? And it’s clear that he still doesn’t get the malinvestment idea, and can only think of capital as an aggregate.
Phelp’s Strange Response
