>Date: Tue, 26 Mar 2002 22:58:12 -0800
>From: Brad DeLong
>Subject: Re: Naomi Klein in Argentina
In the interests of frank discussion here, I'd like to point out that it's looking very much like Brad was right and I was wrong on the question of hyperinflation in Argentina. I still think that the provincial scrip was a side issue, but the latest proposal by the central government to pay public employees in Lecops (when comparable government debt is trading at a 90% interest rate) suggests that debasement of the currency is a formality. Well done Brad and all that.
[and] (or to quote Mr DeLong , [...])
------------------------------
Date: Tue, 26 Mar 2002 22:50:38 -0800 From: Brad DeLong Subject: Re: Fed considered extreme measures
>Nah. Kalecki thought that labor unions and workers were >too dumb to
>notice that they needed cost-of-living increases. We think >they're
>smarter...
I'm reading the original General Theory at the moment, and Keynes (therefore presumably Kalecki) seems to have a decent couple of arguments why labour unions shouldn't be bothering to fight for cost-of-living increases ... yeh, here it is ...
"Though the struggle over money-wages between individuals and groups is often believed to determine the general level of real wages, it is, in fact, concerned with a different object. Since there is imperfect mobility of labour, and wages do not tend to an exact equality of net advantage in different occupations, any individual or group of individuals, who consent to a reduction of money-wages relatively to others, will suffer a relative reduction in real wages, which is a sufficient justification for them to resist it. On the other hand it would be impracticable to resist every reduction of real wages, due to a change in the purchasing-power of money which affects all workers alike; and in fact reductions of real wages arising in this way are not, as a rule, resisted unless they proceed to an extreme degree. Moreover, a resistance to reductions in money-wages applying to particular industries does not raise the same insuperable bar to an increase in aggregate employment which would result from a similar resistance to every reduction in real wages.
In other words, the struggle about money-wages primarily affects the distribution of the aggregate real wage between different labour-groups, and not its average amount per unit of employment, which depends, as we shall see, on a different set of forces. The effect of combination on the part of a group o workers is to protect their relative real wage. The general level of real wages depends on the other forces of the economic system.
Thus it is fortunate that the workers, though unconsciously, are instinctively more reasonable economists than the classical school, inasmuch as they resist reductions of money-wages, which are seldom or never o an all-round character, even though the existing real equivalent of these wages exceeds the marginal disutility of the existing employment; whereas they do not resist reductions of real wages, which are associated with increases in aggregate employment and leave relative money-wages unchanged, unless the reductio proceeds so far as to threaten a reduction of the real wage below the marginal disutility of the existing volume of employment. Every trade union will put up some resistance to a cut in money-wages, however small. But since no trade union would dream of striking on every occasion of a rise in the cost of living, they do not raise the obstacle to any increase in aggregate employment which is attributed to them by the classical school."
You'll notice I'm drawing my example from the first couple of chapters. There's a reason for that ....
cheers
dd
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