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original sin
tall tales
of
the wage/price spiraldean
do you subscribe
to an inertial theory of nominal wages ??
why otherwise
the inevitable inflation??
i for one see no reason to assume an up tick
in the wage hikes not covered by unit produuctivity growth
kicks off the price hikes
in some simple pass thru
by the out put price setterwho willcommit
the original sin here ???
it
matters ....no ???if you try linking changes in the rste of productivity to output price changes
and wage rate changesyou gotta have a scenario
that's plausibleor its just
rude black box 'empiricks'
why should a price setter
allow wage increases higher then
his notion of productivity growth ????can't one make the argument
only un-anticipated
drops or rises
in productivity gains
could acccount for the miss calc
profit margin drop
aquiessnce in a wage increaseunless you think nominal wage raises are on a trend rate and the boys and girls on
the production office
and showroom floors
are not wage rate maxing all along
but instead have a" moral"
expectation
built on prior raisesif that is so
perhapps
the price and wage setter doesn't want to ...upsetthe troops
for fear of an adverse work effort re action...and thus does a olay torro move
and passes the cost thru
and freaks out
the nelly belles
at the fedPosted by: js
thanx
agree about intensity
and slack as not relevent
to your projected concerna secular slowing of
p rate growthit is an
" unexpected slowdown "
that
exactly might lead
to squoozen margins
and phase two price rises-----------------------
my point
--a humble one---
a secular shift to a lower
p growth rate
(your conjecture)
will be adjusted to ..
with a now shorter interval
and leave no reason
to assume long run core inflation
will be effectedand thus no reason to haul
up the fed ratesno nominal wage change
isn't
lucas rational
but close ....
-------------------------
ps
to me its interesting
to look at the decline
of cola bargaining
as a spiral killersince colas really obviate one problem
real wage losses
by intensifying
another
wage price interaction
Posted by js paine at January 23, 2007 05:55 PM