[Review] Heiner Flassbeck - Fundamentals of Relevant Economics

Siehe auch:
[Rezension] Heiner Flassbeck - Grundlagen einer relevanten Ökonomik - Löhne und Kapital

Heiner Flassbeck is an economist from Germany. The economist born on December 12, 1950 was among other things State Secretary in the Federal Ministry of Finance under Oskar Lafontaine (SPD) from 1998 to 1999. And from January 2003 to the end of 2012 he was Chief Economist (Chief of Macroeconomics and Development) at the United Nations Conference on Trade and Development (UNCTAD). Flassbeck publishes among other things on Makroskop and Relevante Ökonomik in German and on Flassbeck Economic in English.

The book "Fundamentals of Relevant Economics (Grundlagen einer relevanten Ökonomik)" was written together with co-authors Friederike Spiecker, Patrick Kaczmarczyk and Alexander Mosca Spatz. The book is clearly specialist literature in nature but not a pure textbook. Although connections are discussed in detail at the level of specialist articles no absolute fundamentals are conveyed. The quality of the derivations is very high as the arguments are based on empiricism and logic rather than made in a vacuum. This sets the author apart from any ideology despite the topic. The book gains additional importance due to the current recession.

Real and Fictional Dynamics

Flassbeck establishes right from the start that there is no labor market. There is a lack of adherence to the classic rules of supply and demand. For example rising or increased unemployment thus a lack of demand for labor cannot be eliminated with lower wages thus a lower price for labor. Wages are the largest cost for companies and at the same time the largest source of income for other companies. Unemployment is not simply a result of excessively high wages thus excessively high prices for labor.

[5, ZCPIN] [5, UVNT] [5, NLHT]

While higher wages also drive the need for investment to increase productivity this dynamic does not work the other way around. Low wages cannot reduce unemployment because existing technology-/capital-intensive production cannot simply be replaced by low-technology/labor-intensive production. Companies do not simply eliminate machinery and equipment when wages fall in order to increase the demand for employers. Companies would thereby deprive themselves of a competitive advantage and make their previous investments obsolete. There is no substitution of capital for labor driven by wage levels.

[5, ZUTN]

[5, OVGD]

For an economy individual companies can gain an advantage by reducing their own wage levels to enable lower prices. Individual countries can gain an advantage by reducing their own wage levels to enable lower prices in foreign trade. However such a dynamic depends on the exchange rate of the domestic economy. If the exchange rate changes to a balanced current account (foreign trade balance and capital transfers) then the effect disappears. In a currency union this dynamic is particularly amplified. In a currency union there are no exchange rates with which to balance the current account. [1, p.224-232]

Golden Wage Rule

Flassbeck places particular emphasis on the golden wage rule. According to this rule wages must increase by the amount of productivity improvements and the inflation rate. And these wage increases must be equal for all workers in an economy otherwise an unequal distribution of workers will be forced. A debate about whether an economy can afford an explicit or implicit minimum wage is therefore an intellectual dead end.

Flassbeck rejects the idea of reducing working hours while maintaining the same wages in line with productivity improvements alone. Companies would have no incentive to invest solely for shorter working hours for employees. Furthermore companies as a sector as a whole do not experience increased demand as a result of reducing working hours at the same wage and therefore companies as a sector as a whole have no additional incentive to invest. Reducing working hours and increasing wages that together correspond to productivity improvements would however be acceptable. [1, p.236-250]

Src:
[1] Heiner Flassbeck - Grundlagen einer relevanten Ökonomik - ISBN 978-3-86489-414-5
[2] Makroskop
https://makroskop.eu/
[3] Relevante Ökonomik
https://www.relevante-oekonomik.com/
[4] Flassbeck Economics
https://www.flassbeck-economics.com/
[5] AMECO - annual macroeconomic database / jährliche makroökonomische Datenbank
https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-databases/ameco-database_en

Einfache Standards

Dieses Blog durchsuchen

[Review] Heiner Flassbeck - Fundamentals of Relevant Economics - Wages and Capital

Real and Fictional Dynamics

Golden Wage Rule

Kommentare

Kommentar veröffentlichen