Vienna Feb 15,1977 
Dear ^ibor, 
Thanks very much f r y ur paper, I have been wait'ng for it- 
It is exceedingly well written and f r that reason alone 
worth having. A art fr u the first p n rt n bargaining -p 6 t 1 - 
on which I have n-> definite ideas, it covers the same ground as 
the Scandinavian the ry f infTati n r my h me made versi n of 
it ( I read very little as y u kn *w). I, w there are obvious 
differences which I would like t' menti n because I may not have 
undorot od hww they are m-vivated- r rather ^ 03nd lUe„. 
The difference is in the exp 1 or. at i n why i. t.'.e industry or 
firm which experiences ti e priraar ■ differential pr 'ductivity increase, 
the innovator, this is passed on t the wage earner r to the 
cust ner, ir. other words, whether t e inn vati n in the fix'st place 
le. do to wage increase or price reduction. I would say ( this seems 
Scandinavian doctrine ) it depends o the lab ur market, you 
might ca.ll it degree of m.>nops< ny, wh. oh is strongly influenced 
by scarcity of labour and i , this way the link of inflation to 
full employment is established. It might be assumed that these firms 
tend to expand in terms of manpower find therefore habe to attract 
labour. Youb tend to assume that they wont noe any ne lac r, 
but perha a they will have to fight for it merely to keep their 
c nnle'.ent of labour constant. There are, in addition special 
explanations eg that the peaple on piece wa.es will earn more 
if the piece rates are not cut ( I meant e standard f efficiency* 
this depends ale> on full ernpl ynent in the Id times they w uld 
have immediately increased the the ste lards). rr the piece wages 
the increase sorea a t tine wages by well kn ■■wn mechanisms 
It depends 2) >n c mpet ti n iathe pr duct market ’ ich 
inter alia may depedd >n the relative sc roity of equi ment. 
w y -v.r ans .er to' this alternative -price r w age res hse - 
b Is dpwn t the distincti n between the case of pro uvt and 
or ce s ion vati n pi 14 1 can't e convinced ' f that 
The price decreases f >r the new or-d cts us'ua.ly c me in the 
c urse f ti e r duct cycle when c sts decrease ■ cn r; ulsy one 
account f scale and utilisati n, XKXIXJd'AXc-'vilfl . t i ■ 
It really belongs to the stage of iffusi nj at any'rate it has 
little to do with the istiaction of product ana process ir. ration.