This paper is based on a long-term research program with Rachel Kranton on the implications of identity
Yüklə 282,09 Kb. Pdf görüntüsü
|
41
In more detail Bewley (1999, pp. 1-2) summarizes his findings: “Other theories fail in part because they are based on unrealistic psychological assumptions that people’s abilities do not depend on their state of mind and that they are rational in the simplistic sense that they maximize a utility that depends only on their consumption and working conditions, not on the welfare of others. Wage rigidity is the product of more complicated employee behavior, in the face of which manager reluctance to cut pay is rational. Worker behavior, however, is not always rational and completely understandable. A model that captures the essence of wage rigidity must take into account the capacity of employees to identify with their firm and to internalize its objectives. This internalization and workers’ mood have a strong impact on job performance and call for material, moral, and symbolic reciprocation from company leadership.” (1999, pp. 1-2) 42 Following the argument by Chetty (2005) some employers may have been concerned with the fact that their employees had fixed mortgages that they would find difficult to pay with cuts in nominal wages. This puts the violation of natural rate theory in another place: why were these financial contracts in nominal rather than in real terms? 31
extensive interviews that, even though substitute labor was easily available, employers were reluctant to cut wages because of the negative effects of such cuts on morale. He says that firms are afraid that cuts in money wages will cause workers no longer to “identify” with their companies. 41 Even if there would be no immediate consequences from such cuts during the recession, Bewley’s employers thought there would be future consequences when the labor market returned to normal. Workers would shirk, and they would also be more likely to quit. These stories indicate that workers are not just thinking about their wages in real terms, relative to the price level or the wages received by others, but they also have a special aversion to cuts in wages below their current nominal levels. 42 Such behavior fails to conform to the underlying assumptions of natural rate theory: that workers only care about relative wages and relative prices.
The Great Depression affords a third observation inconsistent with natural rate theory, at least as long as inflationary expectations are adaptive. An accelerationist Phillips Curve, as in the usual textbook rendition of natural rate theory, suggests that for the whole of the Great
43 See Yellen and Akerlof (2004, p. 24). 44 There are other possible reasons for this failure of the standard predictions from natural rate theory. Inflationary expectations may not have been adaptive; the failure of deflation to accelerate could be due to expectations that the price level would return to some normal level. In the US, the National Recovery Act, which encouraged firms to increase prices, and unionization, which gave a fillip to wages, could also have affected the trade-off between inflation and unemployment. But unemployment was so very high for so very long, and it’s the absence of accelerating deflation was so universal across countries, this still seems to be a dog that did not bark. It seems to point to a problem with natural rate theory. 32 Depression, from 1930 to 1940, inflation should have been below inflationary expectations; with adaptive expectations there would then have been a steady decline in inflation. Such a prediction is far off the mark, not just for the United States, but for every country in the Great Depression for which pricing and unemployment data is available. The data reveal no evidence whatever in any country of constantly declining inflation, even under conditions of massive unemployment. 43
systematically rose nor fell for the next decade. A dynamic simulation in a sticky-money wage model of the US economy by Bill Dickens, George Perry and myself (1996) with sticky money wages and unemployment such as occurred in the Great Depression seems to offer an explanation. It fits the data all but exactly. 44
considerations in mind. Two questionnaire studies yield a fourth type of evidence that workers care about the their nominal wage, and not just their real wage. Shafir, Diamond and Tversky (1997) asked respondents to comment on a vignette about two young women who take their first jobs with the same initial income. Specifically they asked respondents who will be better off: Barbara, who receives a five percent raise in the presence of four percent inflation; or Ann, who receives a two percent raise when inflation is zero. 79 percent of respondents said that Barbara would be worse off than Ann economically. Nevertheless, 64 percent of respondents thought
45 Shafir, Diamond, and Tversky (1997, pp. 351-352). 46 Shiller (1997, p. 37). 33 that Barbara would be happier. 45 Contrary to the assumptions of natural rate theory, these responses indicate that people’s happiness is affected by the level of their nominal, and not just their real, wage increase. It might be easy to dismiss the findings of Shafir et al as just an oddity from a single study. But another study, with a different form of questionnaire, independently found a similar response. Robert Shiller found that 49 percent of a sample of the general public either fully or weakly agreed with the following statement: “if my pay went up I would feel more satisfaction in my job, more sense of fulfillment, even if prices went up as much.” An additional 11 percent of the general public were undecided, while only 27 percent completely disagreed. This, of course, is very similar to the public’s view of Ann and Barbara. Notably, it is also in stark disagreement with the view of professional economists. 90 percent of economists weakly or strongly disagreed with the statement. 77 percent were in complete disagreement. 46
This question was just one in Shiller’s study with very large differences between economists and the general public regarding inflation. Such differences in response questions the theoretical basis of natural rate theory: that those who pay and those who receive wages have exactly the same mind-set as economists. They should be concerned only with real wages or real prices. They should not be happier if pay goes up even though prices go up as much. The views of professional economists accord with such a mental frame. This lack of concordance between professional economists and the public is contrary to the basic theoretical reason why natural rate theory is appealing. Yüklə 282,09 Kb. Dostları ilə paylaş:
|