Abstract
But this system is hard on firms; prices fluctuate with demand, so profits do too. Innovations will make it possible to adjust labor costs more easily, laying off workers when demand drops off, rehiring them when it recovers. In effect this means that the curvature of the production functions is being flattened into a straight line. This leads to a different pattern of market adjustment, replacing the partly stabilizing price mechanism with the destabilizing multiplier.
The remarkable generalization [holds, in a modern economy] that, in all ordinary circumstances, the volume of employment depends on the volume of investment, and that anything which increases or decreases the latter will increase or decrease the former.
—John Maynard Keynes
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Notes
- 1.
“Rent” does not appear in the index of Hicks’ Value and Capital nor in his Capital and Growth nor is it found in Ferguson ’s The Neoclassical Theory of Production and Distribution nor in Morishima ’s Theory of Economic Growth, or Capital and Credit. These are serious books, and they seriously overlook land, rents, and real estate.
- 2.
The “New Business Cycle” (NBC) is to be contrasted to the Old. In the NBC prices are inflexible downward, but liable to inflation upward, labor is flexible; it can easily be laid off, and adjustment to demand is done by varying employment and production. This pattern can be seen throughout the advanced world, cf. Nell (1998b). Studies of the contrasts between the “old” and the “new” business cycle have been made. Nell and Phillips (1995), studying Canada, find good evidence for an inverse relationship between product wages and employment in the old period, and a direct relationship in the new. They also find significant differences in the sizes and characteristics of firms, and in the nature of government between the periods. There is little evidence of a multiplier in the earlier period. Kucera (1998b), studying Japan, found similar results for product wages and output—with certain qualifications—and also found a weakly negative relationship between consumption and investment in the earlier period, in contrast to a strongly positive relationship in the later. Block (1998b), studying Germany, found strongly contrasting relationships between product wages and output in the two periods, as did Thomas (1998b) in an examination of British data for the two periods. These studies are gathered together in Nell, ed. (1998b).
- 3.
These inverse relationships reflect the “scarcity” of money, just as rent reflected the “scarcity” of land. But in each case it can be argued, along similar lines, that the scarcity is contrived.
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Nell, E. (2019). From Craft to Mass Production. In: Henry George and How Growth in Real Estate Contributes to Inequality and Financial Instability . Palgrave Studies on Henry George for the 21st Century. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-18663-0_6
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