🚀 go-pugleaf

In article <1k22avINNflg@darkstar.UCSC.EDU> david@cats.ucsc.edu (David Michael Wright) writes:

>|(Radford Neal:)
>|You also fail to explain why solving the problem of "sticky" wages
>|via inflation is preferable to solving it some other way. 
>
>I know of no other way to solve the sticky wage problem off hand, but
>certainly it is in each individual's interest to have sticky wages, so
>that efforts to end them would likely prove hopeless.

A few points in this regard:

   1) There are at least three interested parties in the "sticky wages"
      problem: The people presently employed at high wages, their
      employers, and the people presently unemployed.  Of these three,
      it is only the presently employed worker who benefits from 
      "sticky wages", the employer and the unemployed worker would
      both benefit from a decline in wages that allowed for more
      profit and more workers to be hired.

   2) Classical economics would predict that sticky wages should be
      eliminated by market forces.  If this doesn't happen, it should
      be possible to identify the factors that prevent it from happening,
      and perhaps eliminate them.  Actually, it may not be a case of
      governments doing something along these lines, but simply one
      of them NOT doing something that inhibits the process.  In the
      1930's, for example, the government exhorted companies to keep
      wage rates high, a clearly counterproductive excercise.

   3) I think we should be naturally suspicious of any attempt to solve
      a microeconomic problem by macroeconomic means.  The side effects
      are quite beyond the possibility of quantitative assessment, so
      it is entirely a matter of faith whether there is a net benefit.

Radford Neal