Consumption patterns

John Quiggin always manages to deliver a good argument within an unusual context, as is this latest from him. His basic assumption, at least as I understand the argument, assumes that the choice to Consume cannot be optimally rational, because Consumption choice will always be based upon current desires under the impact of a necessary condition of equality. The bequest necessary will always be found to be wanting under conditions of current equality, and the replacement value will never be Zero, so that the aggregate consumption can never be constant. The final result states that future Generations will always resent the consumption patterns of the current Generation, no matter what mix of Consumption and bequest is chosen. At least this is what I think he is implying.

Cactus at Angry Bear has a good piece discussing the nature of Labor Demand, which rarely resembles an economic graph of Demand/Supply Curves. His basic statement says there is no direct correlation between Wages and Labor Employed. Most miss this highly relevant fact. It also leaves the basic Employment graph up in the air. What almost no one recognizes is the nature of the Demand and Supply curves in operation which determine Wage scales.

The Supply curve utilized here is the Labor available for employment under some viable Living Wage condition, where labor can be induced to work. The Demand curve in use is not set by the Production Costs of Wages, but the Production Costs of other components of Production. Wage increases regularly come only after there have been significant increases in the Utilities Cost of Production, though other Costs like Transportation, Energy, and Crude Material Costs are also factored in the matrix. Business knows a certain level of Production and Sales must be generated to pay those Production Costs outside of Wages, and that Employment levels can be adjusted to keep Wage Costs within the Production Costs spectrum, no matter the level of Wage. Business further knows that basic increases in Production Expenses require a certain increase in Wage levels, to maintain a consistency of Demand for their Production; employment levels being much less relevant to this necessity of maintaining Production Sales. lgl