>Date: Wed, 9 Feb 2000 17:08:26 -0500 (EST)
>From: bhandari at mmp.Princeton.EDU (Rakesh Bhandari)
>Subject: RE: Japan syndrome
>
>Max, thank you for the reply.
>
>
> >This is way too simple and is contradicted, though not
> >refuted, by simple responses. First, if the real wage reduction
> >is associated with an employment increase, there is a
> >gain to the working class that offsets the loss to
> >some extent, possibly great.
>
>On what basis do you make such an interpersonal comparison of "utility" to
>determine aggregate welfare for the class as a whole?
>
>In a fateful passage Keynes squarely faced such a tradeoff by arguing that
>those who are employed must sacrifice part of their real income in order to
>induce employers to expect a higher marginal efficiency of capital, that
>is, higher profits because only then are the employers ready to take on
>more workers: "It is true of course that any increase in employment
>involves some sacrifice of real income to those who were already employed."
>GT, p. 81
>
>It really should not be surprising to any of us why German finance capital
>not only provided for a quick translation of his GT but the heavy industry
>German newspapers contained long articles upon it. It's not difficult to
>turn Keynes into theorist of anti working class dictators.
>
>Keynesianism seems to me to mean great hardships for the workers, just as
>Mattick argued. Moreover, what is the limit to Keynes' program? Could not
>real wages be forced further and further down until the state convinced
>itself that it had finally abolished all 'involuntary unemployment'?
>
>No wonder a bunch of Harvard boys rallied behind the Keynesian flag in the US!
>
> Second, as employment
> >increases, there is upward pressure on real wages that
> >offsets the initial push.
>
>Which would mean that the Keynesian prop to the marginal efficiency of
>capital would be short lived.
>
> > Third, if there is slack
> >in the economy and prices are sticky, the effect of
> >an increase in aggregate demand could augment
> >employment by increasing both supply and demand for
> >labor.
>
>On a short term basis or at great hardship to those already employed.
>
>Yours, Rakesh