Jim wrote:
"The natural rate of unemployment is in some ways similar to Marx's idea of
the reserve army of the unemployed. Marx saw capitalism as requiring some
minimum amount of unemployment to prosper (though Kalecki pointed out that
this wasn't necessary under fascism; some argue that social democracy can
lower this, too). For Friedman, capitalism is natural, so it's Nature that
requires a minimum amount of unemployment."
I disagree with this point of view. The Marx's argument is very different
of the Friedman's argument. / Mário
----- Original Message -----
From: "Jim Devine" <[EMAIL PROTECTED]>
To: <[email protected]>
Sent: Thursday, April 13, 2006 12:45 PM
Subject: Re: interesting quote
CB:> I guess this means some data came or was reinterpreted to contradict
the Phillips Curve data and interpretation, but I can see why Friedman
wouldn't like the Phillips Curve: Wages up correlated with unemployment
down
would imply just keep raising wages and soon full employment would be
reached, no ? The workers' dream and the capitalists' nightmare. This puts
capitalist economists' focus on stopping inflation in a different light.
I don't think that it. The Phillips Curve is about _money_ wages (W)
going up when unemployment is down. (Money wages are what's printed
on your paycheck.) This is not quite the workers' dream, since when
money wages go up, the capitalists usually raise prices (P). High
demand giveth high money wages to workers but then taketh way by
raising prices. Thus real wages (W/P) may stay the same, fall, or
rise. (Real wages are what goods and services your wages are able to
buy.)
(There's a related concept called the "wage curve" (Blanchflower and
Oswald). In line with Marx, rising unemployment implies falling real
wages, and vice-versa, all else constant. However, it doesn't work
very well at the macroeconomic level.)
Also, the Phillips Curve causation doesn't go as you suggest. It's not
that high wages mean high demand meaning low unemployment. It's much
more a matter of high demand for goods and services (GDP) causing a
high demand for labor (low unemployment) causing faster growth of
money wages (and prices). (Some see high inflation as causing low
unemployment, reversing this causation. In the end, the PC is more of
an empirical generalization than a theory.)
Friedman was opposes to the PC because he didn't like the idea of the
government choosing a low unemployment rate, balancing the benefits of
this situaiton against the costs (inflation). Instead, he wanted the
gummint out of the economy (except to preserve property, profits,
etc.) In his view, the unemployment rate was determined by Nature (the
"Natural" rate of unemployment). If the gummint messes with Mother
Nature, there's Hell to pay in his view.
The natural rate of unemployment is in some ways similar to Marx's
idea of the reserve army of the unemployed. Marx saw capitalism as
requiring some minimum amount of unemployment to prosper (though
Kalecki pointed out that this wasn't necessary under fascism; some
argue that social democracy can lower this, too). For Friedman,
capitalism is natural, so it's Nature that requires a minimum amount
of unemployment.
Higher workers' wages doesn't necessarily mean higher prices, if profits
are
cut. .... Profits would be cut through price controls ( without wage
controls)
in the US, price controls have always been associated with wage
controls, with emphasis on the latter. If profits are cut, the
capitalists would go ape-shit.
"Into the 1970s however, many countries experienced high levels of both
inflation and unemployment also known as stagflation."
Was this inflation higher wages or mainly higher prices ( or both ?). U.S.
wages weren't going up at the time President Ford was handing out "Whip
Inflation Now" buttons were they ?
in the early 1970s (and again in the later part of the Ford
administration), money wages rose more than prices. But during most of
the 1970s, prices rose more than money wages.
Phillips curve
From Wikipedia, the free encyclopedia
I wrote a lot of the Wikipedia text. Since then, I decided that it
wasn't worth it (because people come along and rewrite, sometimes
messing things up totally). Because of this, instead of rewriting the
entry on the "labor theory of value," for example, I'm going to write
a primer on the subject and simply put a link to it in Wikipedia so
that interested readers can look at it.
--
Jim Devine / "There can be no real individual freedom in the presence
of economic insecurity." -- Chester Bowles
