Slight return to the politics of wage bargaining

A little late-night raking over the embers of my jihad against Nick Rowe. RPPE discusses an interesting point of Robert Solow’s – notably that the idea of a vertical long-run Phillips curve and accelerating inflation above the NAIRU is, or was, conventional wisdom, but nobody ever believed that you could push it the other way and get accelerating deflation. Believing in monetarism implied both disbelieving in sticky prices and also believing in them at the same time.

Anyway, from there we get to the question of exactly what “wage bargainers”‘ expectations might be and how they got set in the 1980s.

The big question that comes out of all of this is if when we are talking about labour markets and inflation if we are not better to put our arguments essentially in the terms of political economy such as institutions and bargaining power or in narrow technical terms? Can you even talk about expectations without talking about institutions and power?

Go, read. See also Bloomberg on a little German sunshine and Business Monitor predicting strikes in May. Some people think that’s a bad thing, of course.