Reply To: Real wages


Conclusions like these are some of the unfortunate consequences of an indiscriminate use of aggregates in economic theorizing. There is no “labor market” that exists in any economy; instead, there are many different labor markets employing workers who differ in their skills and other qualities. It follows, as Dr. Herbener states, that there is no “aggregate labor productivity” that determines “the real wage rate.”

Such fallacious reasoning based on imaginary aggregates is one of the most unfortunate consequences of the Keynesian Revolution. For more on this see p. 15-24 in “Tiger By the Tail,” a collection of Hayek’s writings, where he talks about the misuse of aggregates in Keynesian Macroeconomics: