“Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
“Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an assumption which becomes true as a result of it being generally accepted. The Keynesian theory, as it has developed during the last 20 years, has been a formal apparatus which may or may not be more convenient to deal with the facts than classical monetary theory; this is not our concern here. The decisive assumption on which Keynes’ original arguments rested and which has since ruled policy is that it is impossible ever to reduce the money wages of a substantial group of workers without causing extensive unemployment. The conclusion which Lord Keynes drew from this, and which the whole of his theoretical system was intended to justify, was that since money wages can in practice not be lowered, the adjustments necessary, whenever wages have become too high to allow “full employment”, must be affected by the devious process of reducing the value of money. A society which accepts this is bound for a continuous process of inflation.”