Reply To: If they only increased wages…


Well Hoover tried a mild version of that (a high-wage policy on the basis that it would lead to purchasing power which would lead to growth). Basically the main output of such a policy is unemployment, soup lines, and shanty towns set up in parks.

I should be less flippant because there is a superficial plausibility of such reasoning, which means its perennially attractive to noobs. But in order for it to “work” he would also have to mandate employment somehow, so that marginal workers won’t become dis-employed. And if he did mandate employment by such a means, yes, there would be other dislocations – so he would have to implement price policies. Price policies would lead to further dislocations, including probably shortages (even though one would think output would be higher since everyone is employed, this is not the case when dislocations start wreaking havoc in the system; productivity would end up declining. Note productivity declines is a explicit aspect of certain versions of crude Keynsian full-employment policies, such as Keynes’ own example of paying people to dig holes and fill them up again. The net productivity – output – of such jobs is 0. Actually it’s negative because of depreciation of shovels, work clothes, and land through repeated hole-digging-and-backfilling).

Basically it does sound like one of those schemes to inflate your way to prosperity; I mean, the reducto ad absurdum is why stop at a “living wage”? Why not just vote ourselves rich, then output will really soar, amirite?

Anyhow, here’s Gary North on a somewhat similar scheme, the Social Credit movement, which is at the root of a lot of these modern variants.