From the Quarterly Journal of Austrian Economics:
This note argues that the monetary disequilibrium framework mistakes frustrated plans for genuine market disequilibrium (in the sense of a lack of market clearing) and that these frustrated plans are not needed to explain the endogenous processes instigated by a change in the money relation. I argue that localized monetary equilibria are established in the plain state of rest after every transaction and that an interspatial monetary equilibrium is quickly established in the Wicksteedian (fully arbitraged) state of rest.[1] Monetary equilibrium does not require a final state of rest in which all adjustments to production have taken place. It is not clear in the monetary disequilibrium theory literature which equilibrium construct the theory’s proponents have in mind as a requirement for monetary equilibrium. Either way, it is erroneous to consider monetary equilibrium as being established through a costly and/or sluggish adjustment of a mythical aggregate price level. This reality undermines the menu cost rationale for monetary regimes aimed at price level stabilization and supports a regime in which the market process, with the myriad price adjustments it entails, is allowed to operate.
