Almost all markets have slack—idle or unemployed workers, unsold goods, empty rooms or seats. This book builds a theory to explain this basic reality. It shows that slackish markets are generally inefficient and sharply state-dependent; it explains what drives business cycles and why recessions are so costly; and it describes how monetary and fiscal policy should stabilize the economy when slack surges.

Front matter

Part I. Introduction

Part II. Slackish markets

Part III. Application to the labor market

Part IV. Slackish business cycles

Part V. Policies to stabilize slackish cycles

Part VI. Conclusion

Technical appendix

Citation

Michaillat, Pascal. 2026. “A Theory of Economic Slack.” Draft manuscript. https://pascalmichaillat.org/18/.

@unpublished{M26,
author = {Pascal Michaillat},
year = {2026},
title = {A Theory of Economic Slack},
note = {Draft manuscript},
url = {https://pascalmichaillat.org/18/}}