Abstract

The Concept of a Cycle-Forming Wage Lag

The author uses the Report of the German Council of Advisers of Dec. 2, 1968 as an occasion to consider the problem of the wage lag as a cause for recessions, since cycles of 41/2 years can be demonstrated with no difficulty to have occurred since 1950 in the Federal Republic of Germany. The author reviews pertinent literature with the purpose of seeing whether Preiser’s concept can be revived and whether one could therefore speak of a Preiser-effect as an explanation of an upper turning point. Thereupon the theoretical concepts of the Economic Advisors are clarified by means of a simple model. The discrepancy of opinions is the same as the difference between the microeconomic and macroeconomic concept of equilibrium and is explained by risk. Finally the question is asked, whether Wicksell’s argument should not simply be applied to the much more crucial wage costs, whereby interest would have to be substituted by the market wage, natural interest replacing “natural” wages or wages neutral to the level of costs