tag:blogger.com,1999:blog-1740670447258719504.post6913713638708576157..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Krugman on Bob HallEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1740670447258719504.post-17052421774789082012011-04-05T08:04:13.450-04:002011-04-05T08:04:13.450-04:00Yes, essentially.
When you buy a sandwich the int...Yes, essentially.<br /><br />When you buy a sandwich the interest rate doesn't matter all that much because it's a spot market - you will buy other sandwiches in the future at varying prices - and you get the benefits of the sandwich concurently with the cost. The extent to which you discount the benefits of the sandwich don't really matter.<br /><br />If you enjoyed the sandwich over the course of several years, you would take the interest rate into account in the way you discounted those benefits.<br /><br />Economists treat labor like consumption for firms. They buy it on a spot market and they get the benefits from it in the period that they buy it. Really, it's more of an investment. A lot of the labor contracting literature and human capital literature does take this into account.<br /><br />On your "willingness to work for lower wages" question - sure, if you've got a lower reservation wage you'd expect employment to increase. This is a supply point. The point I was making above is a demand problem - which is <i>precisely</i> what you point out in your last paragraph.<br /><br />Garret Jones at GMU apparently talks a lot about labor as an investment.dkuehnhttps://www.blogger.com/profile/10136690886858186981noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-2531808997273159682011-04-05T07:51:24.861-04:002011-04-05T07:51:24.861-04:00Okay, both Krugman's and yours uber-wonkish po...Okay, both Krugman's and yours uber-wonkish posts lost me. ;)<br /><br />I am guessing you mean that when only the most efficient workers are hired, very few workers are hired. And when the most potentially rewarding investments are made, very few investments are made. Am I right?<br /><br />And so it is wrong to assume that when you have very productive workers willing to work for low wages, you will see increased employment. Am I still on track?<br /><br />Instead, we may still see low wages and low employment during a recession, even with high productivity, because there is little demand for whatever is being produced and sold? Okay never mind, but I am just trying to keep up. :)Prateek Sanjaynoreply@blogger.com