Re: Larsson's point on inflation

[larson@xxxxxxxxxxx (S R Larsson)]

>Larsson's point about inflation swings being worse than a constant level
>of inflation is consistent with the old Max Weber theory that what
>business desires most is predictability.
>
>The list has already discussed a point being championed by Krugman (who
>I think, here as eslewhere, borrowed from some real economists) argued
>that a 3% inflation rate is better than a 0% inflation rate.  The gist
>of the argument is that businesses with lower than average profits have
>the ability to adjust their wage levels downward by refrainiing from
>giving cost-of-living raises, which as we know from Mr. K, is less
>difficult than actually forcing wages down.  Achieving wage rate
>flexibility is, if I'm up on my neoclassicals, one of the magic tickets
>to higher levels of employment.  I don't know what a hard-core
>post-Keynesian would do with these theme.
>
>Greg Nowell

I do in no way share Krugman's preference for flexible wages. To the extent
I advocate inflation over nominal price stability it is because future
expectations among businesses are a bit more solid. But that's only so long
as inflation stays within, say, 2-6% frames. In that respect Weber - like
Keynes - got it right.

-----
Sven Robert Larsson
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