What Keynes says in _The General Theory_ is that workers will resist a cut in real wages if it is done through a cut in nominal wages, whereas they will tend not to resist if it happens through mild inflation. It is not due to "money illusion" but rather due to the fact that workers care about relative wages. Since there is no institutional mechanism whereby everyone gets a cut in nominal wages that preserves the relative wage structure, cuts in nominal wages mean changes in the relative wage structure. Most of this is in ch. 2, and it is an institutional analysis that is consistent with Marxist work on workers forming coalitions to protect relative positions within the working class. -----Original Message----- From: Brad DeLong To: [EMAIL PROTECTED] Sent: 1/8/01 3:31 PM Subject: [PEN-L:6718] Re: Re: Re: Re: Re: Re: Implications of Surplus Tax Cut? >Jim Devine wrote: > >> As Doug notes, it's quite possible that Keynes himself liked sops >>to the rich if they worked to help the economy. > >Speaking of which, Ernest Mandel wrote somewhere - maybe in the >Dictionary of Marxist thought? - that "shrewd bourgeois" he was, JMK >liked a little inflation so it could disguise real wage cuts from >the workers. Where did Keynes say that? > >Doug It's one of these Vinerian-Hayekian interpretations of Keynes: that his desire was to fool the workersinto accepting jobs through inflation. You see, they don't really want those jobs that push the unemployment rate down to 4%--they're just tricked into accepting them because they suffer from money illusion. Hence low unemployment is against the interest of the workers... I didn't say that the argument was correct, or coherent. But that is where it comes from... Brad DeLong
