CH. 19

CHANGES IN MONEY-WAGES

271

the volume of employment affect marginal prime costs;whilst in the long period they will only change in re-sponse to changes in the cost of production due to newtechnique and new or increased equipment.

It is true that, if there are, nevertheless, large fluctua-tions in employment, substantial fluctuations in theprice-level will accompany them. But the fluctuationswill be less, as I have said above, than with a flexiblewage policy.

Thus with a rigid wage policy the stability of priceswill be bound up in the short period with the avoidanceof fluctuations in employment. In the long period,on the other hand, we are still left with the choice be-tween a policy of allowing prices to fall slowly with theprogress of technique and equipment whilst keepingwages stable, or of allowing wages to rise slowly whilstkeeping prices stable. On the whole my preferenceis for the latter alternative, on account of the fact thatit is easier with an expectation of higher wages in futureto keep the actual level of employment within a givenrange of full employment than with an expectation oflower wages in future, and on account also of the socialadvantages of gradually diminishing the burden ofdebt, the greater ease of adjustment from decaying togrowing industries, and the psychological encourage-ment likely to be felt from a moderate tendency formoney-wages to increase. But no essential point ofprinciple is involved, and it would lead me beyond thescope of my present purpose to develop in detail thearguments on either side.