tag:blogger.com,1999:blog-10835776.post8962321417311242083..comments2023-10-30T07:45:43.656-04:00Comments on Thoughts and Ideas: Keynes - The General Theory - Chapter II - Sections I and IIA Wiser Man Than Ihttp://www.blogger.com/profile/02405864709965908573noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-10835776.post-64767698686371211902012-01-03T21:22:41.829-05:002012-01-03T21:22:41.829-05:00Did you guys ever take a introductory or intermedi...Did you guys ever take a introductory or intermediate microeconomics theory course? Or a labor economics course? The first and second postulates are exactly what is taught in those courses. Keynes is only trying to sum up those theories, not expand on them in the normative sense. He is simply saying he believes there is another reason why people are unemployed, because the classical models didn't include it.<br /><br />In the years The General Theory was written, an employee and an employer didn't sit down and agree on a wage. Employees didn't have any rights unless they were part of a union.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-10835776.post-51900067100423020392011-03-08T20:32:13.926-05:002011-03-08T20:32:13.926-05:00I think the definition of wage-goods is reasonably...I think the definition of wage-goods is reasonably clear from the text. A wage good is a good on which the utility of your money-wage depends. The utility of what I earn is not affected by the price of private jets. Private jets are non-wage-goods (for most of us!) But the utility of my wage *does* depend on the price of some goods, such as food, rent, transport, etc. These are wage-goods as far as I understand them...Unknownhttps://www.blogger.com/profile/16914443145106814550noreply@blogger.comtag:blogger.com,1999:blog-10835776.post-1918152276634067622010-09-23T11:20:24.708-04:002010-09-23T11:20:24.708-04:00It may in certain cases end up being equal, but th...<i>It may in certain cases end up being equal, but this is not the rule.</i><br /><br />Absolutely correct. If Keynes realizes this, he doesn't run into mistakes later. If the equality always holds true, employees would see their wages fluctuate rapidly. Since we don't see this, Keyens thinks there is a problem, but it's only with one of his postulates.<br /><br /><i>I believe that the second postulate... is essentially saying that people will only work if the utility gained from the wage equals the disutility of giving up leisure time or another job opportunity.</i><br /><br />That's what I think, too. I'm just not sure how this helps Keynes. Certainly it's of no use in providing us with some sort of equality.A Wiser Man Than Ihttps://www.blogger.com/profile/02405864709965908573noreply@blogger.comtag:blogger.com,1999:blog-10835776.post-61425283527508040572010-09-23T01:58:14.613-04:002010-09-23T01:58:14.613-04:00I will withhold comments on the preface and Chapte...I will withhold comments on the preface and Chapter 1, mainly because you summed up his points well, but also because he offers nothing of real value. <br /><br />Section I: In regards to the first postulate, “1) The wage is equal to the marginal product of labour,” there is some value to what is said. The wage that an employer will be willing to offer a prospective employee will not exceed what he deems the employee’s discounted marginal value product to be. It may in certain cases end up being equal, but this is not the rule. It is important to note that any attempt to use this equality to derive a mathematical equation, is not only invalid but of no consequence to economic analysis. Lastly, there is no reason to differentiate between the marginal product of labor and the marginal product of capital. Both are viewed as commodities by the employer, so both simply have a marginal value product. Occam’s razor applies to economics. <br /><br />I believe that the second postulate, “2) The utility of the wage when a given volume of labour is employed is equal to the marginal disutility of that amount of employment,” is essentially saying that people will only work if the utility gained from the wage equals the disutility of giving up leisure time or another job opportunity. As Mises writes in Human Action, “For acting man his own labor is not merely a factor of production but also the source of disutility, he values it not only with regard to the mediate gratification expected but also with regard to the disutility it causes.” <br /><br /><br />Keynes goes on to claim regarding the postulates that, “the first gives us the demand schedule for employment and the second gives us the supply schedule.” I agree that the first postulate relates to the wage the employer will offer, and the second to the wage an employee will be willing to accept. The problem is that he goes on to state, “the amount of employment is fixed at the point where the utility of the marginal product balances the disutility of marginal employment.” This statement reveals precisely how Keynes views employment; as an aggregate rather than individual issue. As you stated, employment comes about when the employer and employee agree on a certain wage. Considering Keynes begins his analysis of employment from the wrong perspective, it should be no surprise when his conclusions are found to be erroneous. <br /><br />Thoughts on section II to follow.Jeffnoreply@blogger.com