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

By Sidney Weintraub | Go to book overview

5
The Law of the Price Level

The near-constant k is one element in our WCM-truism. We can now consider R, the w/A ratio. This leads to another interesting relationship.

Briefly, it establishes the tentative law that the price level will rise only if R rises. This generalization approaches in significance the empirical finding on k. This one is a compound law which builds in an allowance for the synchronous movement in both elements rather than dependent on strong rigidity, as in k.


Correlation of w and A

Before linking R to the price level, Table 5.1 shows the annual index number changes in w, written Δw, and in A, written ΔA. The basic data are computed from Table 3.4. Thus, if A moves down from an index of 78 to 76, then ΔA is written as -- 2.

The data in Table 5.1 are interesting. Paying no attention to the absolute amount of the changes, in 21 of the 28 cases-- that is, 75 per cent of them--both the average pay envelope

-45-

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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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