Re: US Trade Deficit As 'World Engine Of Growth'?

[pdavidso <pdavidso@xxxxxxx>]

>  ----- Original Message -----
>  From: Robert Williams
>  To: Gunnar Tómasson
>  Sent: Friday, September 26, 2003 8:19 PM
>  Subject: Re: US Trade Deficit As 'World Engine Of Growth'?
>
>
>  I wonder if this is why Keynes measured all things in labour units with the
insistence that one distribution of labour would produce one unique level of
output because of the labour that went into it.

No it had nothing to do with what Gunnar isw talking about!

As I explain in my book FINANCIAL MARKETS, MONEY AND THE REAL WORLD, Keynes
deflated all nominal values by the money wage unit in order to use Marshall's
scissor analogue of supply and demand -- where demand is one blde of a scissor
and supply is the other blade.  Marshall then noted thast if we keep one blade
of the scissor constant (by construction) then we can say that the other blade
did all the cutting.

By deflating by the money wage unit, Keynes, by construction, kept his
aggregate suuply blade fixed (i.e., changes in the money wage would not change
the position of shape of the aggregate supply function).  Consequently if
because of some schock initially the point of effective demand (i.e., the
intersection of the aggregate supply and aggregate demand functions both
deflated by the wage unit), then one can demonstrate that ONLY an increase in
aggregate demand (in wage unit terms) can increase employment. In other words,
flexible wages WILL NOT automatically return the economy to full employment --
unless one can demonstrate that changes in the wage rate INCREASES the
aggregate demande function (measured in wage units).

Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
home phone and fax # (865)692-0802
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html