Wage formation in historical perspective: the French experience

Translator's note: In this article Robert Bayer introduces thenotion ‘regulation’ as a key concept in analysesof the labour market. The term refers to the balance of social,institutional and economic forces which characte rise at a particulartime the economic system as a whole or particular parts of it.I considered translating ‘regulation’ as ‘order’,‘regime’, ‘system’ or ‘formation’;but these terms are either too static or already bear inappropriateconnotations. It was therefore decided to retain the Frenchexpression in the English text.     

ACCUMULATION, CAPACITY UTILISATION AND DISTRIBUTION

This paper examines three approaches to the process of accumulationwhich are based on the ‘Keynesian premise’: the‘neo-Keynesian’, the ‘Kaleckian’ andthe ‘Sraffian’. Making some criticisms of the firsttwo from the viewpoint of the third and from a certain formal/conceptualperspective, we propose a synthetic model which is free fromthese criticisms and in which the adjustment of savings to investmentin the long period is achieved through all the three routesemphasised separately by these approaches: changes in the long-perioddegree of utilisation; changes in the ‘normal’ distributionof income; and variations in the size of productive capacity.The key to the synthesis is the hypothesis that, in the longperiod, the ‘normal’ degree of utilisation is endogenouslydetermined to coincide with the average level through mutualinfluence effected by investment in the short period. Our syntheticmodel, like the first two approaches, is in the line of steady-stateanalysis, but in a way compatible with the ‘Keynesianpremise’.     

New Labour, energy policy and 'competitive markets'

By the end of New Labour's first term four central objectivesof energy policy had become established: ‘cheap’energy, the relief of fuel poverty, a major reduction of carbondioxide emissions, and energy security through maintaining awide diversity of primary fuel supplies, all to be achievedthrough ‘competition’. After surveying New Labourenergy policy documents, the paper argues that New Labour failedto appreciate (i) the extent to which, under such a laissezfaire policy regime, these objectives were mutually inconsistent;(ii) that the apparent successes of energy market liberalisationduring the preceding Conservative Governments had little todo with ‘competition’; and (iii) that the transactioncosts of injecting increasing ‘competition’ intoboth British and European energy systems are likely to exacerbatethe growing threat to energy security. The paper concludes witha brief examination of the implications of transaction costeconomics for the organisational structure of the UK energysupply industry.     

Exchange rate indeterminacy in portfolio balance, Mundell-Fleming and uncovered interest rate parity models

With full stock/flow accounting respected, the two-country openeconomy portfolio balance model has just two independent equationsfor asset market clearing. It can determine home and foreigninterest rates but not the exchange rate. If asset market equilibriavary smoothly over time, the balance of payments equation inthe Mundell–Fleming model is not independent and cannotset the exchange rate either. The familiar fixed reserves/‘floatingrate’ vs endogenous reserves/‘fixed rate’dichotomy does not exist, and ‘fundamentals-based’econometric models of the exchange rate are bound to fail. Analternative is a two-country IS/LM model with exchange ratedynamics added. Its dynamic properties under uncovered interestrate parity are briefly explored.     

Keynes, Lucas and involuntary unemployment: a reply to Hayes

In this response to Mark Hayes's criticism of his article, ‘Lucason involuntary unemployment’, the author insists on theneed to draw a distinction between labour rationing (a marketoutcome) and unemployment (the activity of job seeking). Economictheory is mainly concerned with the former. Yet the issue ofthe voluntarity versus the involuntarity of unemployment pertainsto unemployment as an activity. Failing to make this distinctioncannot but lead to semantic confusion.     

THE MYTH OF FREE LABOUR MARKET IN KOREA

The paper challenges the conventional view that a free labourmarket has played a crucial role in producing good growth andequity performance in Korea. The paper first shows that thisview is based on problematic models of growth and equity, andthat it is not supported by the empirical evidence from Koreaeven in its own terms. Then we discuss the conceptual problemswith the notion of ‘free labour market’. It is pointedout that, without explicit moral judgement concerning the underlyingsystem of rights, it is not possible to maintain a coherentnotion of ‘free labour market’. It is then shownthat, contrary to the conventional wisdom, the Korean labourmarket has been heavily regulated, with the state taking anactive role in the management of conflict and in the promotionof learning. We show that the Korean state has tried to manageconflict in the labour market through a combination of politicalrepression, appeasement and mobilisation and has tried to promoteskill formation and learning through manpower planning, subsidiesto education, and various training and retraining schemes. Itis argued that, while by no means unambiguous successes, suchstate involvements in the labour market have been critical inthe industrial success of Korea.     

On Sraffa's Standard commodity

The necessity of expressing the relative price of a commodityin terms of another commodity makes it impossible to distinguishthat part of any change that can be ascribed to the characteristicsof the commodity itself from the part of that change that isto be ascribed to the characteristics of the commodity of reference,i.e., the numéraire. Ricardo (1817) was the first topoint out this problem and the need to find an ‘invariablemeasure of value’, but he was not able to solve the problem.In 1960, Sraffa suggested using a bundle of commodities, thathe called ‘Standard commodity’, to accomplish thisfunction, claiming that it was a standard of value invariantwith respect to changes in the distribution of income. But inSraffa's book there is no explicit proof of this claim. Thisgave rise to many misunderstandings about the Standard commodityand its role as invariable measure of value. This paper proposesa proper definition of an ‘invariable measure of value’,and then proves that the Sraffa ‘Standard commodity’does fulfil the requirements of this definition.     

The functions of the family in the great society

Criticisms by Hodgson and others that Hayek and other Austrianscannot offer a theory of the family are responded to with adiscussion of the functions of the family in a market society.The family can be understood as a bridge between what Hayekterms ‘organisations’, or face-to-face social institutionsand ‘orders’, or the anonymous social institutionsof the Great Society. The family's necessary role is then linkedto familiar Hayekian themes of knowledge and incentives. Familieshelp us to learn the explicit and tacit social rules necessaryfor functioning in the wider world, and families are uniquelypositioned to do so, because it is those closest to us who havethe knowledge and incentives necessary to provide that learning.     

CAPACITY UTILISATION IN THE LONG RUN: SOME FURTHER CONSIDERATIONS

The variability of long-run capacity utilisation has to be consideredas an expression of the determining role played by aggregatedemand in the process of growth. This paper discusses the modelproposed by Serrano in which such a determining role is apparentlyreconciled with the condition of normal utilisation of existingcapacity in the long run. It is shown that Serrano's conclusionslie on the hypothesis of the constancy of the growth rate ofautonomous demand, an assumption which seems to originate froman erroneous interpretation of the property of ‘relativepersistence’ of ‘normal’ magnitudes. The paperargues that if that assumption is abandoned, the autonomy ofaggregate demand necessarily shows itself through the variabilityof capacity utilisation in the long run as well as in the shortrun.     

A simple model of three economies with two currencies: the eurozone and the USA

This paper presents a Keynesian model which describes threecountries trading merchandise and financial assets with oneanother. It is initially assumed that all three countries haveindependent fiscal policies but that two of the countries sharea currency, hence the model can be used to make a preliminaryanalysis of the conduct of economic policy in ‘the eurozone’vis-à-vis the rest of the world—‘the USA’.The main conclusion will be that, if all three countries doindeed operate independent fiscal policies, the system willwork under a floating currency regime, but only so long as theEuropean central bank is prepared to modify the structure ofits assets by accumulating an ever rising proportion of billsissued by any ‘weak’ euro country.     

The Coasean analysis of lighthouse financing: myths and realities

In ‘The Lighthouse in Economics’ (Coase, R. H. Journalof Law and Economics, vol. 17, no. 2, 357–76, 1974), Coasereached the conclusion that in England there existed a relativelyefficient privately financed lighthouse system, which wouldrefute economists' traditional statements concerning the productionof public goods. The purpose of this paper is to challenge hisconclusion. We first show that, from a methodological and theoreticalperspective, ‘The Lighthouse’ is consistent with‘The Problem of Social Cost’ (Coase, R. H. Journalof Law and Economics, vol. 3, 1–44, 1960). Then, applyingCoase's own method (historical case studies), we attempt tore-examine the respective roles and efficiencies of privateinitiative and government.     

Uncertainty: individuals, institutions and technology

In an attempt to refine the concept of uncertainty, this paperelaborates an ontology of the social world concentrating onindividuals, institutions and technology. It shows the strongentwinement of the ontological aspects of the conceptualisationof uncertainty and epistemological ones. It highlights the ontologicaland epistemological dimensions of different concepts of uncertainty,such as fundamental uncertainty, procedural uncertainty, ambiguityand weak uncertainty (or risk). It also comments on a few writingsthat distinguish varieties of uncertainty with adjectives suchas ‘ontological’ and ‘epistemological’or ‘epistemic’.     

Some Cambridge reactions to The General Theory: David Champernowne and Joan Robinson on full employment

This essay analyses early reactions put forward by Cambridgeeconomists David Champernowne and Joan Robinson to J. M. Keynes'streatment of the labour market in The General Theory. Champernowne'sand Robinson's critical reactions represented attempts to fillthe gap of the determinants of changes in money-wages, whichthey both identified as a weak spot in the argument of the book.They rejected, albeit for different reasons, Keynes's notionof the point of full employment as an upper limit defined bythe equality between the real wage rate and the marginal disutilityof employment. Instead of Keynes's taxonomy of types of unemployment,Champernowne and Robinson introduced, respectively, the conceptsof ‘monetary employment’ and ‘monetary unemployment’,and of ‘critical levels’ of employment.     

Keynesian theorising during hard times: stock-flow consistent models as an unexplored 'frontier' of Keynesian macroeconomics

This paper argues that the stock-flow consistent approach tomacroeconomic modelling (SFCA) is a natural outcome of the pathtaken by Keynesian macroeconomic thought in the 1960s and 1970s,a theoretical ‘frontier’ that remained largely unexploredwith the end of Keynesian academic hegemony. It does so in twosteps. First, it phrases the representative views of Davidson,Godley, Minsky and Tobin as different ‘closures’of the same (SFC) accounting framework, calling attention totheir similarities and logical implications. Second, it discussesunresolved issues within this approach and how it differs from‘modern’ theorising.     

Stephen Hymer: Life and the Political Economy of Multinational Corporate Capital

This paper provides a short account of Stephen Hymer's lifeand (its link to) his contribution to the theory of the multinationalenterprise (MNE), but mainly the political economy of multinationalcorporate capital. It suggests that as concerns the theory ofthe MNE, Hymer's contribution has in effect predated most currentextant theory. His contribution to the political economy ofmultinational capital, the focus here, is less known, yet ofextraordinary insight and foresight. Hymer predates most importantdebates on what today is called ‘globalisation’and came up with analysis of the highest quality and predictionswhich in the main have stood the test of time. The chief limitationin Hymer's work stems from a tendency to emphasise the monopolyattributes of large MNEs, and the inefficiency and inequityof ‘multinational corporate capital’. In part becauseof this tendency, some of his later work involved predictionsthat did not necessarily and/or fully follow from his analyticalframework, were shaped by ‘ideology’ and were ofvarying agrees of accuracy. Despite limitations, Hymer's overallcontribution and impact fully deserves the almost ‘cult’status he has acquired in the history of economic thought andinternational business scholarship.