An Adaptation of Weintraub’s Model

Abstract

Professor Sidney Weintraub has been signaling important messages on economics in the sense that if economists had paid sufficient heed to his work, much of the present confusion and damage to economies could have been averted. Some of his explanation seems to be too complicated, however, and this has, in my view, impeded a wider understanding of the elements. This paper attempts to simplify his model, as presented in several works (1958, 1978, 1981), by introducing the notions of: (1) capacity utilization, (2) the profitability condition, and (3) by using a variable markup ratio. These ideas yield a downwardsloped relationship between money wages and employment and thereby exclude Weintraub's Keynesian and underconsumptionist cases (1958, ch. 6). The wage share is written as a function of capacity utilization, with its actual value determined by an aggregate supply and an aggregate demand curve (see Weintraub, 1981). The framework has immediate implications for classical inflation and stagflation. For contrast Appendix II contains analysis of the neoclassical interpretation of Keynes.