Saturday, January 12, 2013
Tim Harford — What really powers innovation: high wages
Interesting analysis of why Britain was the scene of the Industrial Revolution and not China, or France. Innovation to increase productivity is driven by high domestic wages. Technology enables owners to do with fewer workers, so innovating has a cost incentive.
Why did the industrial revolution take off in the UK rather than in China?
The Undercover Economist
What really powers innovation: high wages
Tim Harford
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as my professor fred Lee (UMKC) points out quite often, those who make the argument for higher wages aren't really making an argument at all, and if they are they've got it backwards (for example many so called "keynesian structuralists" like Tom Palley, who routinely embarrass themselves by arguing for high wages as if that and not effective demand is the issue). High wages can happen if employment is kept high because EFFECTIVE DEMAND (which must be fed by INVESTMENT BY THE CAPITALIST CLASS) is high. If you don't have a sufficient level of effective demand, then you don't get all the benefits that stems from it.
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