Post
Topic
Board Economics
Re: Is deflation truly that bad for an economy?
by
twiifm
on 14/04/2015, 12:50:54 UTC
Sorry I have trouble following your argument.  Originally you argue that by lowering wages, the workers benefit because as a result lower prices will follow. 

It seems that in this thread, people have difficulty following a somewhat involved argument.  The point I argued AGAINST, was:

- "industrials should pay high wages to their personnel, because otherwise they don't have customers that can buy their products".

I argued against it by providing a similarly erroneous statement which applied this time not to entrepreneurs that make goods, but to workers that produce labor (call it reductio ad absurdum):

"workers should pay more labour to their employers so that these can sell cheaper products, and so that employers can buy more labour"

and I argued ALSO against it with my "weak" form of Say's law.

My point is that there is no need that it are LABORERS that buy products.  It can just as well be share holders.  The more you pay to laborers, the less you pay to your share holders.  So the more your laborers can buy your products, the less your shareholders can buy your products.

I gave an ultimate example of a hypothetical totally automatic production, where there is NO labor any more.  Then all the income goes to share holders.  They can just as well buy the products, while according to the theorem I am arguing against, if there are no wages, there would not be any consumption.  That's simply not true, because what is not paid as wages, can be paid as dividends.

That's the contents of my "weak" version of Say's law.


I made that argument that increased wages would in turn increase aggregate demand.  Its a macro argument not micro.  When people have nore money they buy more stuff.  Simple as that

Your example is pointless because its science fiction. 

Shareholders cant do all the consumption for all of society.  You need a wide consumer base.  One guy buying a $10mm yatch fromnone business is not same as 1mm people buying various $10 items from many business

Shareholders can enjoy capital gains without any increase in dividends.  Its not zero sum between shareholder vs worker