Quote from: dinofelis on April 14, 2015, 03:53:02 PM

Quote from: twiifm on April 14, 2015, 12:50:54 PM

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

It doesn't of course, because the amount by which wages increase, the dividends decrease. The same amount of money is set in circulation, it only targets different people (because different production factors). As such, of course, demand will be different in quality.

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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

It is a different demand, and there will be different products.

Consider a totally automatic economy, completely robotized, that produces luxury sports cars, palaces, kaviar and champagne. With robotized high-level medecine, and every other thing a rich person may need or desire. And of course robots. You could think of an economy that is totally run automatically, and where all the profits go to their shareholders, which are also the consumers of these luxury products. The economic circle is closed, and not a single wage is paid, and not a single amount of labour is sold. In this case, the share holders are the sole consumers, and generate the total agregate demand for the goods they produce.

This is an extreme case, but it illustrates that "wages" do not play a specific role in the circulation of money. It only plays an important role when labour is important, but it has no fundamental role.

When labour is important (when it is needed in large quantities in industry), then of course industry needs to answer the demand of the potential labourers to a sufficient extend to buy their labour. And that's what wages are, and that's why the industry is mass-consumption oriented.

But that doesn't have to be so. Industry can be luxury oriented if labour is not needed in large quantities, or, as in my gedanken experiment, at all.

You make too many assumptions about static earnings. If revenues increase then theres money to increase both dividends and wages. There's no inverse relationship between wages and dividends. I dont know why you think there is.

There is no point in entertaining examples w no basis in reality. Robots doing work for free making stuff for rich people? Roll Eyes