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Steindel: Wage Rigidity—Comment of the Day

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Charles Steindel: Comment on Modigliani (1944): Liquidity Preference https://www.bradford-delong.com/2020/08/modigliani-1944-liquidity-preferencenoted.html?cid=6a00e551f0800388340263e9612965200b#comment-6a00e551f0800388340263e9612965200b: ‘Modigliani '44--a grand vintage! (connoisseurs also should try the '63). Seriously, after 2008 I started musing on the concept of "rigid wages." We vaguely thought of that as essentially an ordinal variable. If wages were less rigid, the economy is more responsive to the real factors, less so to the monetary factors. Now a think it's a lot less linear. Flexible wages and prices (of goods and services) would, it seems, need to be a lot more like asset market prices to be in that blissful non-Keynesian world. But one could hardly live in it; it is

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Charles Steindel: Comment on Modigliani (1944): Liquidity Preference https://www.bradford-delong.com/2020/08/modigliani-1944-liquidity-preferencenoted.html?cid=6a00e551f0800388340263e9612965200b#comment-6a00e551f0800388340263e9612965200b: ‘Modigliani '44--a grand vintage! (connoisseurs also should try the '63). Seriously, after 2008 I started musing on the concept of "rigid wages." We vaguely thought of that as essentially an ordinal variable. If wages were less rigid, the economy is more responsive to the real factors, less so to the monetary factors. Now a think it's a lot less linear. Flexible wages and prices (of goods and services) would, it seems, need to be a lot more like asset market prices to be in that blissful non-Keynesian world. But one could hardly live in it; it is convenient to know what a quart of milk will cost in dollars when setting out to the grocery store...

.#commentoftheday #2020-09-17
Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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