Price Takers' Plenty in a Model of Pure Capitalism.

Scitovsky, Tibor

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Document type:: Collected items

Collection:: Josef Steindl Collection

Title:: Price Takers' Plenty in a Model of Pure Capitalism.

Author:: Scitovsky, Tibor

Scope:: Kopie eines Typoskripts, 27 Blätter, mit handschriftlicher Korrektur und Korrektur mit Korrekturfolie, Paginierung von 5.1-5.20 und von 3.21-3.26

Year of publication:: 1983

Source material date:: [November 1983]

Language:: English

Note:: Draft.

Related work:: Scitovsky, Tibor: Pricetakers' Plenty: A Neglected Benefit of Capitalism. In: Kyklos, Dec 1985, Vol. 38 Issue 4, S. 517-516

JEL Classification:: D41 [Market Structure, Pricing, and Design: Perfect Competition]

Shelfmark:: S/M.33.7

Access:: Free access

5-12 The employment so created is strictly limited if the newly employed workers save part of their additional income. But as rising employment and output approach the physical limits of productive capacity, that may stimulate investment as well; and an investment-connected multiplier, of course, requires no price reductions nor extra sales effort. In short, the employers 1 excess demand for labor in a producer-dominated labor market is quite likely to generate upward cumulative processes in the face of economy wide unemployment. Accordingly, generalized, nationwide unemployment, if not incompatible with a producer-dominated labor market, is at least likely to be mitigated and unlikely to persist. (As an aside, let me mention the use of the above argument in relating the macroeconomic theory of the multiplier to the microeconomic theory of the price-maker employer's response to the availability of unemployed labor, and in making more explicit how and why an upward multiplier process can increase employment and output without also raising x-rages and prices.) So far, I was trying to show how the price maker's excess demand for labor leads him to employ additional workers involuntarily unemployed. The same excess demand, however, can also keep him from firing workers when demand for his products declines. for he may well find it profitable to respond to the fall in sales by trying to restore them through a price reduction or increased advertising, while keeping wages and the number of \vorkers employed unchanged. That conclusion follows from the fact that since the MVP of labor is initially higher, perhaps quite a bit higher than the

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