Abstract
SUMMARY A tentative unified micro-macro model is developed to explain the persistent inflation-unemployment morass by replacing the competitive endogenous money wage theory with the exogenous facts of collective bargaining. Inferentially, a feasible Incomes Policy would alleviate inflation while reserving monetary and fiscal policy to sustain full employment. The aggregative Keynesian macromodel developed builds on Walrasian, Marshallian, and monopoly micro-foundations. Wage-share constancy, which also underlies Cobb-Douglas macromodels, provides a simplifying hypothesis with empirical underpinning for mark-up pricing. ‘Cost-push’ and ‘demand-pull’ as distinctive inflation forces appears generally spurious. Both forces have common roots in excessive money wage increases.
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