Re: The Long-Term Problem of Full Employment (was German real wages in the Depression)

[tom walker <lumpoflabour@xxxxxxxx>]

Jim Devine wrote:

> extrapolation from past experience is just as much
> an academic
> exercise as is prediction based on models.

That may be. But what I meant by "not an academic
exercise" is that Keynes' writings here were in the
context of a high-level government policy discussion,
not the elaboration or testing of some theory.

> And JMK''s extrapolation was off-base --
> perhaps because he
> didn't anticipate "military Keynesianism" as a way
> of life.

Not at all. Keynes framed his phase iii suggestion in
contrast to "embarking upon wasteful and unnecessary
enterprises." So obviously he recoginized that
wasteful and unnecessary military expenditures could
provide an alternative, which in this case could more
properly be called military anti-Keynesianism.

> FWIW, I wasn't "sneering" at anything.

I've never heard you invoke the lump of labour
fallacy, Jim, so you have no need to defend yourself.
I wasn't talking about you sneering.

> BTW, in the old "new Keynesianism" of the late 1960s
> (Patinkin,
> Clower, Leijonhuvfud, Barro & Grossman, etc.), if
> aggregate demand is
> fixed (relative to potential), there is a
> sales-constrained labor-time
> market: lower wages don't induce greater employment
> (despite the
> assumption that an aggregate neoclassical production
> function exists)
> because biz can't sell the extra product that
> arises. The effective
> demand for labor-time curve is _vertical_. This
> means that if the
> number of hours of labor-time per worker hired
> falls, the number of
> workers hired rises, ceteris paribus.
>
> Of course, the old NKs didn't focus on this element.
> Instead, they
> focussed on the idea of shifting the sales
> constraint on the labor
> market. This involves either raising C+I+G+NX the
> old fashioned
> Keynesian way or relying on bogus "Pigou" or "real
> balance" effects to
> boost aggregate demand as prices fall.

Which all seems to be studiously ignoring the
explicitly tripartite nature of the strategy that
Keynes was arguing for, on three separate occasions,
in these notes. "How you mix up the three ingredients
of a cure is a matter of taste and experience, i.e. of
morals and knowledge." So how can you "mix up" these
three ingredients if you only use one or two of them
and if the third is off-limits?

The Sandwichman

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