Rugoz wrote:The NAIRU makes sense as a concept, so does hysteresis. Both are being taught in so-called mainstream economics. They do not contradict each other. It's just that hysteresis changes the level of the NAIRU.
I can agree that, as a concept,
NAIRU does make some sense. That is, if UE were pushed by Gov action down to 0.01%, then wages would likely go up. But, there is a huge gap between 0.01% UE and 20% UE.
I had to look up 'hysteresis'. It means "lag behind or come later than"). It seems in MS economics to refer more to 'lag behind', but not in time but in level. As in as the UE rate goes up the NAIRU goes up with it.
. . Under CAUSES, WIKI says, "When some negative shock reduces employment in a company or industry, there are fewer employed workers left. As the employed workers usually have the power to influence or set wages, their reduced number incentivizes them to bargain for even higher wages when the economy again gets better, instead of letting the wage stay at the equilibrium wage level, where the supply and demand of workers would match. This causes hysteresis, i.e., the unemployment becomes permanently higher after negative shocks.
. . It has also been argued that unemployed people lose their skills during unemployment, which makes them less likely to again get jobs."
. . With all due respect, this is BS. It seems to claim that as a comp. lays off workers, the remaining workers will be able to bargain for more pay. This has not been rue in the Neo-liberal age. Workers bargaining power has been constantly reduced. This is a perfect example of MS economists ignoring facts and reality and sticking to their false assumptions in the face of contrary real evidence.
Since that was the whole of the text that explained why the assumed effect does happen, and I don't see the effect happening, then for me at least, there needs to be a better argument.
. . For me, it stands unproved and likely false.
Like I said in my OP, all this ideologically
driven. That is, it is assumed to be true despite no evidence that it is true in reality.
Besides which, MMT is calling for a whole new way to control inflation. MMTers know that infation needs to be controlled. Despite MS claims MMTers are very aware that inflation is the only risk of larger Gov. deficits. [Deficits by Gov. not in the EUor EZ and that don't have debts money in foreign currencies.]
. . MMT's new inflation control system is its Job Guarantee Program. All MS economists refuse to look at how this would work. Or, if it would work as claimed.
The lurkers will have to think for themselves. They can't rely on MS econ. to do their thinking.
If you want to learn more, googe MMT & Job Guarantee Program. I have already explained it.
Going beck to the 'cause' that hysteresis happen with UE, I think I could make a case that as UE goes up the NAIRU goes down. The higher UE rate, the more UE workers there are, and so pgq the *less*
bargaining power the still employed workers will have.
. . How does that sound. To me it, as a concept, sounds just as likely or more likely than the opposite.
Also, this theory claims that once UE reaches 25% the Gov. can't do anything to save the economy without high inflation. So, lets just let 25% of the workers starve for the next 100 years. Or, does MS econ. have a way that we can avoid letting a continually growing part of the population starve, in a land of plenty. One that works.!!
. . What is it? We now know that EU style *austerity* is not the way, because it has not worked for over 12 years now.
You young workers/lurkers have nothing to lose but your chains.