9058009863

CHAPTER II

16

86230

relatively better potitlon, this' helped the first country to avold a sharper recetslon.. On the other • hand, if a country happened to face an exceptlonal booa, the constralnt of International trade could be cared for by the aeans of a aoderate slow-down of growth, given the expanslve trends of the other cónnected countries.

There was only one 'black cloud* ln this happy iandscape. It was given by aoney wagę push, or drlfts, due to fuli eaployaent.

4. IheaodeI_of_the_aood

Łet us consider briefly how the sltuation consldered above was styllzed by standard econoalc aodelllng. The prevalling standard picture was glven by what we could cali the 'fix-prlce¹ Keyneslan aodel. The econoalc aystea was represented as perforalng in the followlng way. Neither relatlve coaaodity prices, nor the ratlo between aoney wages and prices, nor expectat^#lons, play any relevant role, The only thlng whlch aatters is the level of output whlch ls deaanded. The aggregate supply is perfectly elastlc up to the level of fuli eaployaent; beyond this, lt becoaes perfectly rlgid.

A sltuation of eąulllbriua ls characterized by the fact that the output whlch ls produced in each period is fully sold, Selllng all the produced (and therefore planned) output is a proof for the firas that their declslons about how auch to produce were correct; therefore, such declslons are confiraed for the followlng period. There are no systeaic or spontaneous reasons why this eąullibriua output should be a fuli eaployaent output. Therefore there can be uneaployaent. A sltuation of uneaployaent eąullibriua tend to reproduce Itself period after period. There is no reason, in fact, for the firas to revise their declslons. This ls seen by the theory as belng due to a sort of inforaational gap. If, ln fact, all producers could be convlnced to produce aore and to hlre aore workers, this would deteralne an lncrease in the wagę bill, and, as a consequence of this, in the level of finał deaand. And this lncrease ln deaand would aatch the increased supply.

However, no single producer would aake by hlaself the declsion to lncrease his output and to hlre aore workers, sińce this declsion would not produce an lncrease ln the deaand for his own output. And each of the producers has the saae attitudes. Thus, not only are the producers unaware of the systeaic interdependency aaong a coaaonly shared declsion to produce aore and the aggregate conseąuence of this in teras of increased finał deaand, but, even if they had such an awareness, they could not have any guarantee that the declsion to produce and hlre aore, aade by one of thea, would be followed by the reaalnlng set of producers.

In such a sltuation, any publlc lnterventlon aiaed at lncreaslng the finał deaand perforas as an order, or a slgnal, conveyed to the econoay. Newly produced aoney, introduced in