MONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM This doctrine depended on Keynes' notions of money-wage behavior At more than minimum unemployment, a rise(fall) of demand and em- ployment would produce a once-for-all rise(fall) of the money wage prices constant; a rise(fall) of the price level would cause a rise(fall)of th money wage in smaller proportion. Hence, in a stationary economy at least, his theory did not predict the possibility of a secular rise of money wage rates at normal unemployment rates-let alone wage rises exceeding productivity growth-only the one-time"semi-inflation"(Keynes, 1936, p. 301)of prices and wages during the transition to minimum unem- ployment. This doctrine was quickly disputed by robinson(1937, pp 30-31) wrote of a conflict between moderately high employment and stability. Dunlop(1938)suggested that the rate of change of the money wage depends more on the level of unemployment than upon the rate of change of unemployment, as Keynes had it. After the war, Singer(1947) Bronfenbrenner(1948), Haberler (1948), Brown( 1955), Lerner(1958), and many others wrote that at low albeit above-minimum unemployment levels there occurs a process of“ cost inflation,”"“wage- push infation,” ¨ income inflation,”“ creeping inflation,”“ sellers' inflation,”“ dilemma inflation,” or the‘ new infation”- a phenomenon which was attributed to the discretionary power of unions or oligopolies or both to raise wages or prices or both without"excess demand I believe this customary attribution of cost infation to the existence of such large economic units to be unnecessary and insufficient. Like the theory of unemployment, the theory of cost inflation requires a nor Walrasian model in which there is no auctioneer continuously clearin commodity and labor markets. Beyond that, it is not clear to me what monopoly power contributes. An increase of monopoly power-due, say, to increased concentration -will raise prices relative to wages at any given unemployment rate and productivity level; but employment rate, the real wage has fallen (relative to productivity) continuation of inflation will depend on other sources will stop and any enough to accommodate the higher markup this process ush theorists like Weintraub (1959) to treat innatic almost spontaneous, virtually independent of the unemployment rate over any rele vant range, and hence not induced by aggregate demand I once tested the hypothesis that the 1955-57 inflation was more of this character than were the two earlier post ar infla making the push"would be uneven in its sectoral incidence, so that the coefficient of correlation between sector price changes and sector output changes would (if the hypothesis were true) be algebraically smaller in the 1955-57 period than it was earlier(1961). It was stical significance of the decline was impossible to determine. Incidentally, Selden,s correlation test ( 1959) wrongly attributes significance to the positivity of the coef n 1955-57 instead of to the magnitude of tl 3 The answer of Ackley (1966)and Lerner(1967) that correspondin mployment rate and productivity level there is a natural real wage that is irreducibleMONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM 679 This doctrine depended on Keynes' notions of money-wage behavior. At more than minimum unemployment, a rise (fall) of demand and em￾ployment would produce a once-for-all rise (fall) of the money wage, prices constant; a rise (fall) of the price level would cause a rise (fall) of the money wage in smaller proportion. Hence, in a stationary economy at least, his theory did not predict the possibility of a secular rise of money￾wage rates at normal unemployment rates-let alone wage rises exceeding productivity growth-only the one-time "semi-inflation" (Keynes, 1936, p. 301) of prices and wages during the transition to minimum unem￾ployment. This doctrine was quickly disputed by Robinson (1937, pp. 30-31), who wrote of a conflict between moderately high employment and price stability. Dunlop (1938) suggested that the rate of change of the money wage depends more on the level of unemployment than upon the rate of change of unemployment, as Keynes had it. After the war, Singer (1947), Bronfenbrenner (1948), Haberler (1948), Brown (1955), Lerner (1958), and many others wrote that at low albeit above-minimum unemployment levels there occurs a process of "cost inflation," "wage-push inflation," "income inflation," "creeping inflation," "sellers' inflation," "dilemma inflation," or the "new inflationu-a phenomenon which was attributed to the discretionary power of unions or oligopolies or both to raise wages or prices or both without "excess demand."2 I believe this customary attribution of cost inflation to the existence of such large economic units to be unnecessary and insufficient. Like the theory of unemployment, the theory of cost inflation requires a non￾Walrasian model in which there is no auctioneer continuously clearing commodity and labor markets. Beyond that, it is not clear to me what monopoly power contributes. An increase of monopoly power-due, say, to increased concentration-will raise prices relative to wages at any given unemployment rate and productivity level; but once, at the prevailing unemployment rate, the real wage has fallen (relative to productivity) enough to accommodate the higher markup, this process will stop and any continuation of inflation will depend on other ~ources.~ Some wage-push theorists like Weintraub (1959) appear to treat inflation as almost spontaneous, virtually independent of the unemployment rate over any rele￾vant range, and hence not induced by aggregate demand. I once tested the hypothesis that the 1955-57 inflation was more of this character than were the two earlier post￾war inflations, making the assumption that autonomous "wage push" or "profit push" would be uneven in its sectoral incidence, so that the coefficient of correlation between sector price changes and sector output changes would (if the hypothesis were true) be algebraically smaller in the 1955-57 period than it was earlier (1961). It was algebraically smaller, but the statistical significance of the decline was impossible to determine. Incidentally, Selden's correlation test (1959) wrongly attributes significance to the positivity of the coefficient in 1955-57 instead of to the magnitude of the decline. The answer of Ackley (1966) and Lerner (1967) that corresponding to every unemployment rate and productivity level there is a natural real wage that is irreducible