Post
Topic
Board Economics
Re: Is deflation truly that bad for an economy?
by
twiifm
on 13/04/2015, 19:59:22 UTC
the benefit is that you have increased output.

I can now use the same strategy towards a worker.  I can say that in order for my products to become cheaper so that he can buy more of them, I propose that he works 20% more time for a slightly lower wage.  The logic is the same.  If the guy tells me: "hey, you propose me to work more and earn less ?" I will answer him: "but my dear, your benefit is that you have increased your output" Smiley


Its a macro concept not micro

I will tell him that too Smiley


Seriously, the argument is totally flawed, because it goes against Say's law.  Say's law says that all beneficiaries of all the production factors of a product make exactly the amount of money necessary to buy up all of the production, if they want to.

Consider an extreme case, where industry is totally automatized and labor is worth zilch, because there is no labor needed any more.  According to your argument, in such a case, that industry wouldn't find any customers, because labor wage (macro) is zero.

Nothing is less true.  In fact, all the sales go in the pockets of the share holders, so THEY can buy the products.

In a totally automated industry, the industry will make products for the share holders, which will be their sole customers, and which will be totally served by all the fully automated  production.  Without one single dollar of wages.


Who cares about Say's Law?  Its not correct and outdated