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wage profit price spiral
is there a rate
of robust growth
beyond which
unemployment fears
turn to
wild wage increase cockiness ??
back in the early 60's mao dumped a top guy
cause the bum
believed
"two became one"not
" one becomes two "
a dialectical no no
but behold
we find in the standard
" dynamic stochastic general equilibrium model with wage and/or price stickiness.."
two indeed do become oneand the taylor rule becomes
a johnny one note policy lever
a single variable
as the optimal control
systemthe rate of price level
changeyup
with all that implies in the real world
if we apply it
to the real worldthe model shows
if we are interested in "social welfare max "
we better
control
the rate of price change alone
not
the output gapnice class peace result
no struggle for a higher wage share can happen
cause the credit crunch slows the nominal wage lift
till it is justified by inflation rate targetstoo bad
its most
likely
the performance
of our "real" economy
eludes this win win
and social welfare max
in reality requires a different policy
like maybe employment max
or at least push to the point where it actually lifts the price change rate seriously
and
the best results
don't come from
a jobster/ profiteer colaborative
that short run "seems " to favor profiteersahh yes
this characteristic
of the standard sticky "model"
gives it
a pretty facebut
then again
seems simpler to me
to just
go ahead
and "do it"
and
see what happens
maybe our main stream model here
and the
fear of wage price
inflation spirals
it pre supposes
is just a self fulfilling
sun spot theory effect
policy guys trigger a slow up in the credit system for fear of an impending inflation surge
never finding out if unprepted
there was really anything there to pre empt
------------------
turning to look
at the 'lessons " of the "rudely empirick "maybe
if we hadn't mythologized
the 70's into the Great Inflation Era
to balance off
the 30's Great De-presion Eralas if
our carter years were like
almost
weimar vous
all over again .....maybe we'd have the balls to go
be -lower stillmoral:
maybe
we oughta pretend
there's no dire harm
in finding out
what's whatand take
the real thing
out there
on a test dive
keep the credit flowing
even after
we get down
to pardigm depthswhere a fuller full employment
awaits us
let's go see
if we really
can trigger
savage
super rapid -er
nominal
wage growth
simply be creating job opportunities for everyone
Posted by js paine at January 5, 2007 09:42 PM