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- 1 3 wage, the fall in sales and consequent leftward shift of the MVP curve may still leave the marginal value of labor for an unchanged workforce and unchanged output no lower than the wage. Another and perhaps simpler way of looking at the same situation is to regard the workers made redundant by the fall in as the extra workers seeking work at the given wage; and it is profitable to re-employ them if their MVP, though lower than it was before, remains above the wage. Profits, of course, are bound to fall with unchanged production costs and reduced sales revenues (or higher advertising costs); but the policy may nevertheless be the best available. Indeed, there are examples of firms' following exactly that policy — and not only under pressure from Ministries of Employment but under the guidance of the profit motive as well. Note those the important asymmetry between the wage-maker employer's response two situations. His response to the availability of unemployed 1 of rising employment s to abor sets in motion a cumulative process/if the situation is nationwide or at all widespread. His and his colleagues' response to a general fall in sales on the other hand not only does not initiate any multiplier process but nios in the bud the downward cumulative process^of falling sales causing falling employment, causing falling incomes, causing further falling sales, etc -J) which would result if employers failed to dominate the labor market and so failed to have an excess demand for labor. In short, employers' excess demand for labor imparts a strong upward or-expansionary bias to responses to external cnanges in tre markets tney xace.

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