The challenge of macro

I find that I'm spending a lot of time these days trying to reconnect financial concepts with real world macro-economic concepts. There's a feeling that I'm trying to break through some sort of veil of analogy in order to see what it actually means when people make proposals to "get credit flowing again" and "stimulate the economy" and whatnot. I'm hardly alone in the effort of course, and a post from interfluidity goes in this same direction:

Think about that: "overcapacity in almost all industries". Perhaps we exist in a more enlightened world than I ever imagined. I've always thought that human want for material goods was basically unlimited. Apparently not! We have enough, not just here in the once gluttonous U.S. of A., but everywhere. All of the nearly seven billion humans of planet Earth have no use for anything more than they already have. Subsistence farmers in Africa prefer to live as they do, because it plays charmingly in National Geographic. If you offered them 10 million Yuan and a shopping trip, they'd shyly refuse.

The world does not now, and never has had, a general problem with "overcapacity". It might be sensible to talk about overcapacity with respect to a particular good or service in a particular setting. Maybe five Starbucks Cafes really are too many for one city block. But as a macroeconomic phenomenon, overcapacity is bullshit. Capacity can be misaligned — there might be too many sock factories for too few shoe factories. But there can be no general overcapacity, only underutilization.

This is an important thought, but only partially true. It leaves out an irreducible psychological element. The human desire for cheap plastic shit is limitless, but it is not constant. People and societies really do go through periods of over and under confidence, over and under desire.