Friday, June 24, 2016

Sandwichman — FLEXIT

You can see immigrants. You can't see NAIRU or flexible labor market policies. Most people wouldn't know a NAIRU from a Nehru jacket and have probably never heard of flexible labor market policies.
There is a simple logic behind the "growth through austerity" policies beloved by Cameron and Osborne: "wages are too damn high." But there is also a more technical-sounding obfuscation. This more convoluted explanation is that there is a long-run, "natural" rate of unemployment that is unaffected by aggregate demand, therefore fiscal stimulus will result in inflation. Thus the only non-inflationary way to reduce unemployment is to fine tune this hypothetical natural rate by removing labor market rigidities.
Sounds plausible. What it means in practice is "wages are too damn high." In the 19th century, this superstition was known as the wages-fund doctrine. Also known as this magazine of untruth.…

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