CH. 2 POSTULATES OF THE CLASSICAL ECONOMICS II

not altogether independent of what the correspondingmoney-wage happens to be. Nevertheless it is themoney-wage thus arrived at which is held to deter-mine the real wage. Thus the classical theory assumesthat it is always open to labour to reduce its realwage by accepting a reduction in its money-wage.The postulate that there is a tendency for the realwage to come to equality with the marginal disutilityof labour clearly presumes that labour itself is in aposition to decide the real wage for which it works,though not the quantity of employment forthcoming atthis wage.

The traditional theory maintains, in short, that thewage bargains between the entrepreneurs and the workersdetermine the real wage; so that, assuming free com-petition amongst employers and no restrictive combina-tion amongst workers, the latter can, if they wish,bring their real wages into conformity with the marginaldisutility of the amount of employment offered by theemployers at that wage. If this is not true, then thereis no longer any reason to expect a tendency towardsequality between the real wage and the marginal dis-utility of labour.

The classical conclusions are intended, it must beremembered, to apply to the whole body of labour anddo not mean merely that a single individual can getemployment by accepting a cut in money-wages whichhis fellows refuse. They are supposed to be equallyapplicable to a closed system as to an open system, andare not dependent on the characteristics of an opensystem or on the effects of a reduction of money-wagesin a single country on its foreign trade, which lie, ofcourse, entirely outside the field of this discussion.Nor are they based on indirect effects due to a lowerwages-bill in terms of money having certain reactionson the banking system and the state of credit, effectswhich we shall examine in detail in Chapter 19. Theyare based on the belief that in a closed system a reduction