Aggregate Demand, Employment and Equilibrium with Marginal Productivity: Keynesian Adjustment in the Craft Economy

Download

212-341-1-PB.pdf

Date

2008-6

Author

Nell, Edward J.

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

50
views

106
downloads

Most Post-Keynesians have approached the idea that marginal productivity accounted for the demand for labor with scepticism. None of them have thought that supply and demand for labor determined employment and real wages. All agree that Keynes' approach recast the argument in money rather than real terms. But if the market operates with money wages, how exactly does the real wage adjust to the marginal product? If the real wage adjusts in the labor market, why is full employment not established? When there is unemployment in "equilibrium", why is it so deep and persistent? The argument will be that Keynes was thinking in terms of fluctuations in aggregate demand, and asking how a Marshallian economy would respond. Keynes can be interpreted as demonstrating that a multiplier is consistent with flexible prices based on profit-maximizing under diminishing returns - so that the real wage equals the marginal product of labor. However, the Marshallian perspective has to be amended, as the economy moved towards Mass Production. In this paper, we will first examine the accepted account of the labor market, then go on to Marshallian technology and the price mechanism, showing how the economy would adjust to changes in aggregate demand. Then we will consider the consequences of a movement from a craft technology to Mass Production, and finally we will look at the Keynesian questions in fully developed Mass Production.

Subject Keywords

Keynes, Economic Theory, Marginal Productivity

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/212
https://hdl.handle.net/11511/58393

Journal

ODTÜ Gelişme Dergisi

Collections

Department of Economics, Article

Suggestions

OpenMETU
Core

Labor market institutions and industrial performance: an evolutionary study Kilicaslan, Yilmaz; Taymaz, Erol (2008-08-01) This study investigates the impact of labor market institutions on industrial performance from a Schumpeterian perspective. We suggest that labor market institutions play a very important role in the process of creative destruction, because they may create an environment that encourages and enforces innovation, and help to reallocate resources, most importantly labor, through swift elimination of weak performers. We specifically look at the effects of the quantity of labor market regulations and inter-indus...
New Technologies and Changes in Work Organizations: A Survey Arslan, Ulaş; Erdil, Erkan (Science And Technology Policies Research Center, Middle East Technical University (Ankara, Turkey), 2003) Recently, relative demand for multi-skilled labor has increased sharply. Information and education became the most important factor when determining the role of labor at work. Especially, the intense rise of microelectronic technologies changed the structure of production after 1970s. By the effect of changing structure of production and growing competition brought a new organization of work. The main aim of this study is summarize the literature on the transformation of production systems and the impact of...
Race to the Bottom: Low Productivity, Market Power, and Lagging Wages Taylor, Lance; Ömer Cender, Özlem (2019-01-01) "Dualism" in the structure of production across sectors of the U.S. economy, employment by sector, productivity levels and growth, real wages, and intersectoral terms of trade increased markedly between 1990 and 2016. The discussion focuses on 16 sectors. Seven were "stagnant"-construction, education and health, other services, entertainment, accommodation and food, business services, and transportation and warehousing. They had low productivity levels, productivity growth rates hovering around zero, and lo...
Do R& D expenditures matter for labor productivity in OECD countries? an unresolved question Erdil, Erkan; Çorakcı, Ayşegül (2013-01-01) The aim of this study is to analyze the relationship between labor productivity and R&D expenditures. We have tested this relationship using a panel of 22 OECD countries that covers the period 1991-2003. A Cobb-Douglas production function was estimated in growth form where physical capital, knowledge capital, human capital, and labor stock were included as the factors of production. The estimation results that also controlled for the effect of openness, and R&D spillovers implied a positive long-run R&D ela...
Analysis of an options contract in a dual sourcing supply chain under disruption risk Köle, Hüseyin; Bakal, İsmail Serdar; Department of Industrial Engineering (2012) In this study, value of demand information and the importance of option contracts are investigated for a supply chain consisting of a buyer and two suppliers in a single period setting. One supplier is cheap but prone to disruptions whereas the other one is perfectly reliable but expensive. At the beginning of the period, buyer orders from the unreliable supplier and reserves from the reliable supplier through a contract that gives buyer an option to use reserved units after getting disruption information o...

Citation Formats

E. J. Nell, “Aggregate Demand, Employment and Equilibrium with Marginal Productivity: Keynesian Adjustment in the Craft Economy,” ODTÜ Gelişme Dergisi, vol. 35, no. 1, pp. 1–27, 2008, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/212.