Abstract
Monetary theorists have not taken much explicit interest in the determination of the general level of wage rates. By and large, the ‘ classical ‘ monetary theorists were concerned with the determination of the price level, taken to be the focal point of analysis of the trade cycle and the mechanism of international adjustment. Money wage rates, like the prices of particular goods, were left to be inferred from the price level by the application of value and distribution theory. On the other hand, modern theorists, following Keynes, have been chiefly concerned with the determination of the level of output and employment, and of the rate of interest. In their analysis, the money wage level has tended to be placed outside the range of economic analysis, being treated either as a datum or as an exogenous variable.
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Notes
See D. Patinkin, ‘Further Considerations of the General Equilibrium Theory of Money’, Review of Economic Studies, XIX, 3 (1952–1953), pp. 186–195.
See, for example, A. C. Pigou, Lapses from Full Employment (1945), p. 24. The Pigou effect operates only on that part of the money supply which is not created against debts of various kinds, a limitation which restricts its practical as opposed to its theoretical significance. In the case of financial obligations other than money, and of money backed by debt, the increased wealth of creditors is counterbalanced by the decreased wealth of debtors, and there is no presumption as to the net effect, although it might be argued that in the case of government debt the increased real value of the obligations would not influence the government’s behaviour, so that the Pigou effect would extend to private holdings of public debt and of money backed by it. In so far as private debt held by banks is redeemable, the money supply will tend to fall pari passu with the wage-price level, as the demand for bank accommodation falls.
J. Tinbergen, Business Cycles in the United States of America, 1919–1932 (1939), p. 55, equation (3.1):
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© 1957 International Economic Association
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Johnson, H.G. (1957). The Determination of the General Level of Wage Rates. In: Dunlop, J.T. (eds) The Theory of Wage Determination. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15205-6_2
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DOI: https://doi.org/10.1007/978-1-349-15205-6_2
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