Re: German real wages in the Depression\Classical Views

[Paul <paul_@xxxxxxx>]

Jim D. writes:
> This seems to be the idea that if wages fall enough, it restores
> profitability and thus spurs accumulation. I argue against this as a
> universal rule. Rising profits in a severe recession can make
> underconsumption problems worse.

Right, IF that were a universal logic (total wages down, total profits up,
long term accumulation resumed, end of story) it would be a neo-classical
self-correcting business cycle theory, not a classical theory.

But I also wouldn't buy the converse *as a universal logic* (total wages
up, profits down, long term accumulation resumed, end of story).  A "pure"
Keynesian story.  Although it could be true in a particular circumstance,
at a particular time.

One has to account for BOTH going on at the same time look at the
elasticities of the impact of each and include the fact that long run
profit trends *may* be caused by other issues in addition to wages, such as
technological stagnation.  This is why I emphasized that the story that
Doug heard sounded only expositional -- to show that the Keynesian story
*could* be an incomplete look at the picture.

Paul