Tag Archives: wage and price flexibility

Often, I hear economists saying that they never realized that adjustment in the Eurozone would come via lower wages.... econoblog 101“The fourth instrument” – Frits Bolkestein on the how to cope with economic crisis in the EurozoneDirk Ehnts | Lecturer at Bard College Berlin

This is a major error of neoclassical theory, and the mistaken view some people still attribute to Keynes: that wage and price flexibility in theory is still a reliable and effective mechanism for reaching full employment, even if the real world has wage and price rigidities. In fact, Keynes rejected that view.Curiously, even some Institutionalist economists have failed to understand it. For example, even Gardiner C. Means – the American Institutionalist who developed administered price...