Re: German real wages in the Depression\Classical Views

[Paul <paul_@xxxxxxx>]

Jim D. writes:
> FWIW, some Marxists advocate a self-correcting recovery like this, though
> it's not just concerning wages. It also involves mass bankruptcies of
> usually-smaller capitalists.

[Thanks for reminding us to include the bankruptcy part.]

I think Doug was trying indirectly to make similar point about marxists
(and, by extension, I could add Sraffians).  But WHO, in the last half
century, do you think actually says this? (serious question).  I mean truly
"advocate a self-correcting recovery", as distinct from saying "this
downturn won't go on forever but if the recovery is left to its own devices
we could lose decades, waste hundreds of trillions and spoil hundreds of
millions of lives - we must turn to alternatives now".  Mentally, I have
tried to run through the list of "crisis theories" popular in the last 50
years and I worry that one may be setting up straw men.

But how best should we describe the "business cycle" experience of the last
100 years?  I am mindful of Michael's point about the contradictory nature
of what we want to describe.  I hear Jim and Doug's hesitation over
attributing "automaticity" to the upturns from recession or
depression.  (Keeping in mind the difference between that view and some
sort of *acceptable* 'self-correction' mechanism, which is the
neo-classical view.)

Now let's look at the direct alternative to 'built in' mechanisms
accounting for the upturns - i.e. "voluntarism".  The "pure" post-keynesian
explanation relies on government fiscal/monetary policy as accounting for
upturns - nothing inherently structural caused the problem or provides the
solution.  Future crises have a ready remedy - clever, committed government
using only judicious fiscal/monetary policy *without* a requirement for
deeper structural change.

Perhaps neither "pure automaticity" nor "pure voluntarism"  adequately
covers all post-war experience - nor represents a tenable political
position?  And in diagnosing causes and solutions, I think we need to make
clear distinctions between so-called short run fluctuations and the long
trends and structural problems.  (The short run problems may be more
susceptible to *either* "built in" or "policy based" corrections than the
deeper trends.)

This is why I was keen to point people to papers that argue 80/20 or 20/80
rather than 'all or nothing'.  And once we leave the black and white world
behind, actual empirical evidence and concrete analysis starts to become
critical.  I am always struck be how very little we know about the big
questions in economics.  For example, I think it was JD who pointed out on
this list that the U.S. has almost no experience with *active* Keynesian
fiscal policies (in the Abba Learner/Functional Finance mold); mostly it
has been limited to the passive policies of automatic stabilizers and a
large stable military budget.  [BTW, I think this latter point cuts BOTH
ways in the automatic/voluntaristic dichotomy.]

Paul