Jim Devine wrote, >The MF's theory of the "natural" rate of unemployment argues that real >wages should be hurt in the short run by inflation, as in the COLA story >above. In his theory, workers suffer from short-term "money illusion" in >which they misinterpret their higher money wages as higher _real_ wages and >are thus willing to supply more labor despite the actual fall in real wages. Me: Well and good. Deitsch and Dilts suggest the continuation of that money illusion in a new package. Not only are they receiving higher real wages, but they also get an "adjustment" to compensate for inflation. Jim: >My model (which follows Soskice & Carlin much more than the MF) says that >as U falls, workers have more bargaining power. (Bargaining power allows >workers to put their inflationary expectations into practice.) This says >that as U falls, the COLA should improve in quality (where "quality" is >defined by workers). But the above research doesn't say anything about >changes, only the level of the quality of COLAs at a specific point in >time. If COLAs were always bad for protecting real wages, it would indicate >that inflation _always_ coexisted with falling real wages. But in the late >1960s, real wages did very well, despite the inflation. Me: Jim, I agree with your premise that as U falls, workers would have more bargaining power (or at least potentially). Whether they would use it or know how to use it is another question -- THE question. It's my impression that we actually agree about the fundamentals, that it comes down to an issue of class struggle rather than market equilibrium. What we seem to disagree about is whether there's a place for class struggle in the NAIRU, or in a NAIRU. That is a matter of rhetorical strategy, not a matter of science or fact. One could either oppose NAIRU as incoherent or attempt to construct an alternative, coherent NAIRU. There are pros and cons to either approach. Because they are rhetorical strategies, they are not mutually exclusive. You are right about the Deitsch and Dilts analysis not looking at change in the COLA over time. That's partly why I'm intrigued by the orphan status of the D&D article. Can you point to empirical studies that document the increasing adequacy of COLA clauses since the early 1980s? It seems to me that after roughly 1982 (the publication date of the article) *concession bargaining* not COLAs became the major theme in labour relations. One might even speculate that the detrimental COLAs (along with government policy, of course) helped pave the way for concession bargaining. It was during the 1970s that COLAs became widely adopted, so I don't see much point in looking at their role in the late 1960s experience, either. Jim: >BTW, it is the late 1960s experience that is the best case for the profit >squeeze theory of inflationary acceleration that I have been talking about. >The MF's followers take the example of inflationary acceleration of the >late 1960s, misinterpret it, and generalize it to all of history. Me: >>But all this chatter about accelerationist models is beside the point I >>wanted to make. Jim: >So what I do is "chatter"? Such flattery will get you nowhere. Me: I was referring about my own chatter. Jim: >BTW, Tom, do you think that the US or Canadian economy (as currently >organized following capitalist rules) could live with 1 percent >unemployment for 10 years without accelerating inflation or price controls? Me: No. Do you? Does anybody? But isn't "as currently organized" and "price controls" a non sequitur? And wouldn't "one percent" unemployment be, effectively, _negative_ unemployment? Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ #408 1035 Pacific St. Vancouver, B.C. V6E 4G7 [EMAIL PROTECTED] (604) 669-3286 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
