Global melodrama

[michael perelman]

Seth asked how wages could stagnate while the economy grew, yet have
profits fall. The solution to the riddle is that heavy competition
propelled by technical change and over capacity caused capital to be
devalued.  Firms, especially railroads, went bankrupt.

Barkley Rosser says that you can explain this outcome with monetarism.  I
agree that it is consistent with monetarism.  I think that we would nearer
to the truth by explaining the problem in terms of what was going on in the
market for goods.  Neither explanation is exclusive of the other.

Seth Ackerman wrote:


> Michael Perelman wrote:
>
> <<The economy grew during the "fast deflation" of the late 19th C.
> Profits fell,
> wages did not increase much, but the economy grew, leading some to deny
> that any depression occured.>>
>
> How can the economy grow faster than the sum of wage growth and profit
> growth?
>
> Seth Ackerman
> FAIR

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu