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

3.25 
which, is the exact opposite of a rising; supply curve of labor: 
the customary source of monopsony power in the labor market # That 
difference turns everything upside down. It puts the KC of labor 
below and not above the wage, which in turn explains why the 
employer's monopsonistic behavior in the short run is expansionary 
and not restrictive, .as monopoly and monopsony usually are. Such 
an upside-down situation, of course, is exactly what we need, 
because it replicates in a modern environment many of the desirable' 
features of a labor market dominated by the producer's side, and does 
so without its undesirable distributional features 
In particular, the higher MVP of labor than its short-run MC makes it 
profitable for employers to retain their workers (and maintain output) in the 
face of falling demand, to employ additional labor if unemployed workers are 
available, or, in a tight labor market, to engage in nonprice competition 
and offer fringe benefits in order to attract additional workers. Especially 
strong is the inducement to retain workers, because the lox*/ MC to be saved by 
dismissing the marginal worker would be due to the bonus he would forfeit going 
to the other workers. No wonder that job security is the most notable feature 
of the Japanese labor scene. Somewhat less strong is the inducement to employ 
more workers, because their employment reduces the individual worker’s share 
in the bonus; and if that lowers the wage, it may, at a later stage, lead to 
a demand for a raise. But the time lag is long, productivity may rise in 
the interim, increasing the firm's revenue and labor's bonus; and a larger 
bonus can easily counterbalance the effect on wages and wage demands of the 
individual worker's diminished share in that bonus. In other words, the
	        

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