On 9/23/07, Eugene Coyle <[EMAIL PROTECTED]> wrote: > Yes, your argument is correct, but don't your (1.) and (2) increase > unemployment? >
It does. The way I understand it, the first order effect of increased productivity is unemployment. But there is a second order effect of stimulating additional demand that would increase employment. Which effect will predominate? I think there is no general answer. It seems very similar to the argument about whether tax revenues will increase if marginal tax rates are decreased. First order effect: tax revenues decrease. But according to the conservatives there will be so much extra growth as a result of reduced tax rates that net revenues will actually increase. This logic appears dubious mainly because the people who support it tend to have a self-serving agenda. But there may be circumstances when it does work out that way. -raghu.
