Hayek: Full Employment at Any Price?
Quotes from F.A. Hayek "Full Employment at Any Price?" in Economic Freedom (Blackwell, 1991).
The belief that, in order to make new investment profitable consumers' demand must increase is part of the same widespread fallacy to which the businessman is especially prone. It is true only of investment designed to increase output by using the same techniques as hitherto employed, but not of the only sort of investment which can increase productivity per head of worker by equipping a given hour labour force with more capital equipment. Such intensification of capital use is indeed encouraged by relatively low product (consumer good) prices (which make it necessary to save on labour costs) and discouraged by high ones. This is one of the elementary connections between wages and investment wholly overlooked in Keynesian economics. (p.294: italics are from original)
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