A General Theory of the Price Level, Output, Income Distribution, and Economic Growth

By Sidney Weintraub | Go to book overview

4
The Law of k

Several times we have alluded to the high constancy in k, the mark-up factor of employee compensation in the basic formula.

Hitherto we have been told to peek at it but not look at it too closely. Now we want to scrutinize it from every direction, with full undistracted attention and absorbed fascination. It is probably the most important economic law, in the true sense, that economists have to work with. It is an unmatched empirical fact of the state of affairs in our economy which literally defies explanation. And yet it holds.

Consider what its unparalleled constancy and rigidity signify. The United States economy in the 1930's went through the deepest depression of our industrial history. The period was marked by important legislative changes affecting our economic pattern. In the 1940's we experienced the greatest of modern wars. There were price controls, regulations, and onerous rates of taxation. Since the close of the war we have had high prosperity and mild recessions.

Through all this the k-factor has gone its course, hardly changing the path that somehow guides it and keeps it steady in rough economic seas. What is the explanation? Good ones are lacking.

-33-

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A General Theory of the Price Level, Output, Income Distribution, and Economic Growth
Table of contents

Table of contents

  • Title Page iii
  • Preface vii
  • Contents ix
  • Introductory Note 1
  • 1 - A New Predictive Theory 3
  • 2 - The Basic Truism 9
  • 3 - The Partition and Measure of Elements 13
  • 4 - The Law of k 33
  • Conclusion 43
  • 5 - The Law of the Price Level 45
  • 6 - On Predicting the Price Level 57
  • 7 - The Wedding Ceremony: Price Level and Aggregate Output 69
  • 8 - The Eclipse of the Equation of Exchange 75
  • Conclusions 83
  • 9 - A Miscast Federal Reserve 85
  • 10 - Wage Policy: A Way Out 89
  • 11 - Decomposing k 93
  • 12 - An Empirical Macroeconomic Theory of Income Distribution 105
  • 13 - A Final Price Level Generalization 109
  • 14 - The Price Level Over Time: The Final Synthesis for a Growing Economy 111
  • Conclusion 118
  • Concluding Note 119
  • Index 121
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