community is subject to an earthquake that destroys all of the houses and apartments, its members will have a sudden increased demand for new housing. Immediately after the disaster, the market for housing in the community will be temporarily out of equilibrium, suffering from an excess demand for houses and apartments (shortage). But if markets are free to operate (i.e. if prices are free to change), and given enough time, prices will increase, causing (1) construction companies to build new houses in the short run and (2) new companies to enter the house and apartment-construction market in the longer run. This increase in production brings supply into balance with the new demand. The adjustment mechanism has cleared the shortage from the market and established a new equilibrium. A similar mechanism is believed to operate when there is a market surplus (glut), where prices fall until all the excess supply is sold. An example of excess supply is Christmas decorations that are still in stores several days after Christmas; the stores that still have boxes of decorations view these products as excess supply, so prices are discounted until shoppers buy all the decorations (to keep them until next Christmas). History and non-ideal behavior For 150 years (from approximately 1785 to 1935), the vast majority of economists took the smooth operation of this market-clearing mechanism as inevitable and inviolable, based largely on belief in Say's law. But the Great Depression of the 1930s caused many economists, including John Maynard Keynes, to doubt their classical faith. If markets were supposed to clear, how could ruinously high rates of unemployment persist for so many painful years? Was the market mechanism not supposed to eliminate such surpluses? In one interpretation, Keynes identified imperfections in the adjustment mechanism that, if present, could introduce rigidities and make prices sticky. In another interpretation, price adjustment could make matters worse, causing what Irving Fisher called "debt deflation". Not all economists accept these theories. They attribute what appears to be imperfect clearing to factors like labor unions or government policy, thereby exonerating the clearing mechanism. Most economists see the assumption of continuous market clearing as not very realistic. However, many see the assumption of flexible prices as useful in the long-run analysis since prices are not stuck forever: market-clearing models describe the equilibrium towards which the economy gravitates. Therefore, many macroeconomists feel that price flexibility is a good assumption for