Is Price Enough?

["John Gelles" <jjgelles@xxxxxxxx>]

	IS  LOWERING  PRICE  ENOUGH  TO  EMPLOY
	ALL  WHO  NEED  WAGES  TO  LIVE?     OR  IS
	SOMETHING  MISSING   FROM  A  SYSTEM  OF
	PRODUCTION  THAT  PAYS  WAGES  OUT  OF
	PROFIT  THAT FALLS  WITH  LOWER  PRICES?

	It takes very little theory to note how important profit
	is to employment-- and how important wage levels are
	to living standards.

	It takes genius, however, to sell democratic lawmakers
	an idea of what is missing -- what the system can afford
	by way of profit ensurances that will not cause more
	problems than it solves.

	If Keynes thought government payrolls to ensure full
	employment were the missing ingredient, he is challenged
	by those who see such payrolls as insufficient to call
	forth efficient production of what an economy needs to
	sustain a high standard of living -- especially for its
	poorest workers.

	Assuming today we believe that the payrolls needed
	(to be financed by government spending or lending --
	not necessarily as a direct employer-producer) must
	also be strategically identified and efficiently managed,
	why would we need to preface their use by any
	theory of radical uncertainty.  True, uncertainty must
	be admitted and planned for.  But success in bridge
	building is based on minimizing uncertainty -- not make
	it into a religion.

	By the same token, endowing money with the certain
	power to add to production is again problematic.  Money
	can often motivate effort ahead of proof that it will hold
	value over time.  We even have individual firms able to
	hire labor against a promise to pay wages at the end
	of the week -- comes the end, and they fold and run.
	This pattern can repeat -- but not too often.  If it does,
	people will demand payment ahead of working like
	landlords ask for rent in advance.

	So the answer to the original question is best answered
	with empirical experience, both from well sampled data
	and from anecdotal evidence.

	We hear from Henry Liu today that Japanese officials
	have no desire to raise Japanese prices at the cost of
	a cheaper yen.  They see a cheaper yen and an open
	economy as an invitation to the USA to steal Japanese
	capital assets Japan has no intention to part with.

	So Japanese commodity prices remain low;  exports and
	the yen remain high.  And free trade with no protection
	of domestic markets and jobs is rejected out of hand.
	Things are certain enough for the Japanese to fear use
	of the American model.  And money is precious enough
	for Japan to refuse to spend like a drunken sailor on
	commodities to collect at home instead of selling them
	abroad.  Neutral or not, money is nice to have when
	other people want you to buy what they're selling.

		John Gelles