Re: Tribute to GH article

[paul davidson <pdavidson@xxxxxxx>]

At 11:52 AM 5/22/01 , you wrote:
> Paul,
>
> Kahzuro's message has sparked my thinking about your article in the
> tribute volume to Geoff harcourt.
>
> I have not re-read it in about 3 months, but i have the distinct
> imnpression that, begginning out of equilibrium, you demonstrated that a
> cut in real wages would not lead to an increase in economic activity.  i
> have not had time to play around with this simple model of yours,
> however i get the impression that it depends on mpc < 1.  if this is the
> case, then does it follow that cuts in the wage level which are severe
> enough to bring wages down to subsistence, and hence mpc = 1, will,
> eventually, lead to full employment.


No it has nothing to do with the mpc.   Because workers can not bargain for
a real wage.  See my answer to Kahzuro.