출처: F.A. Hayek (Lawrence H. White 편집), Collected Works of F.A. Hayek, vol. 12: The Pure Theory of Capital, 2007년 재판.
자료: 구글도서 (cf. Mises Institute's version) ; 차례 및 일부 독서노트
※ This is a reading note with excerpts taken, and personal annotations or remarks added, in trying to understand the above text. So, visit the source links above to see the original .
CF. Keynes's remarks on Leslie Stephen and J.S. Mill's proposition that "demand for commodities is not demand for labour" in his General Theory, : Chapter 27. Chapter 23. Notes on Mercantilism, The Usury Laws, Stamped Money and Theories of Under-Consumption ( 일반이론 독서메모 ; my catalog of Keynes's writings )
※ 발췌(excerpts): pp. 433~ [PDF 466 ~ ]
Appendix Ⅲ
"Demand for Commodities Is Not Demand for Labour" Versus The Doctrine of "Derived Demand"
John Stuart Mill's celebrated proposition that “demand for commodities is not demand for labour”[1] is to the present day one of the most disputed theories of economics. It was the fourth[2] of this fundamental propositions respecting capital and is closely connected with the first of these propositions that “industry is limited by capital”. The idea underlying both these statements goes back at least as far as Adam Smith, who expressed it by saying that "the general industry of society never can exceed what the capital of society can employ"[3] In the writing of Bentham the formula that "industry is limited by capital" became almost the leitmotiv, and it was of course familiar to all the members of the classical school of economists. When finally J.S. Mill explicitly stated his fourth proposition, which is more particularly the subject of this appendix, it was little more than a corollary of the first, which he had taken over from his predecessors, and of course closely connected with the wage fund theory. But like the latter it was almost immediately assailed,[1] and has ever since been the butt of attack and even ridicule by a long list of eminent economists from Jevons[2] to E. Cannan[3] and J.M. Keynes.[4] It has, however, always had its defenders, including Marshall[5] and particularly Wicksell,[6] and Leslie Stephen even described it, and Mr. Keynes has recently reminded us, as “the doctrine so rarely understood, that its complete apprehension is, perhaps, the best test of an economist”.[7]
[4] J.M. Keynes, 1936, p. 359[7] History of English Thought in the Eighteenth Century, p. 297.
That in more modern times the doctrine has suffered a marked eclipse is mainly due to the fact that the modern subjective theory of value was erroneously thought to have provided an effective refutation. The modern view of value taught, of course, and nobody can seriously quarrel with this general proposition, that the value of the factors of production is based on the utility of their products and that in this sense it can be said to be "derived' from the value of their products. In so far as this idea was used to explain why the value of particular factors of production changed relatively to that of others, it provided indeed an extremely important key to the solution of problems which had puzzled many earlier generations of economists. And in general it may be said that in so far as the theory of the kapitallose Wirtschaft is concerned the principle is valid without restrictions.
It was thought, however, that the application to an economy using extensive capital equipment not only did not diminish the significance of the principle but even increased it. The simple "principle of derived demand" became the basis of the so-called "acceleration principle of derived demand", based on the idea that in a system using highly capitalistic methods of production any increase in final demand would give rise, not only to an equal increase in the demand for factors but to a much greater increase in the latter, since in order to satisfy the increased final demand it would be necessary to build up, within a short period, all the additional capital equipment required to produce the additional output.
In so far as this argument is applied to the demand for a particular product and its effect on the demand for the factors from which it is produced, there is little to object to. The meaning and validity of the argument become, however, much more questionable as soon as it is applied, as it immediately was when used in the theory of the trade cycle, to the relation between the demand for consumers' goods in general and the demand for factors of production in general. In its original form, based on the modern utility analysis of value, the argument is clearly not capable of this extension. In fact it is difficult to see what meaning we could attach to the statement that an increase in the value of consumers' goods in general would lead to a similar increase in the value of the factors of production in general, since this would imply that the aggregate value of all goods taken together has increasedㅡa statement which in terms of the modern utility analysis would clearly have no meaning.
Before we proceed further, however, it will be advisable to re-state Mill's proposition in a form which leaves no doubt about its exact meaning. It was thought, however, that the application to an economy using extensive capital equipment not only did not diminish the significance of the principle but even increased it. The simple "principle of derived demand" became the basis of the so-called "acceleration principle of derived demand", based on the idea that in a system using highly capitalistic methods of production any increase in final demand would give rise, not only to an equal increase in the demand for factors but to a much greater increase in the latter, since in order to satisfy the increased final demand it would be necessary to build up, within a short period, all the additional capital equipment required to produce the additional output.
In so far as this argument is applied to the demand for a particular product and its effect on the demand for the factors from which it is produced, there is little to object to. The meaning and validity of the argument become, however, much more questionable as soon as it is applied, as it immediately was when used in the theory of the trade cycle, to the relation between the demand for consumers' goods in general and the demand for factors of production in general. In its original form, based on the modern utility analysis of value, the argument is clearly not capable of this extension. In fact it is difficult to see what meaning we could attach to the statement that an increase in the value of consumers' goods in general would lead to a similar increase in the value of the factors of production in general, since this would imply that the aggregate value of all goods taken together has increasedㅡa statement which in terms of the modern utility analysis would clearly have no meaning.
- In the first instance it is probably clear[,] from that use to which the doctrine has been generally put[,] that we are entitled, as we have already done, to substitute consumers' goods for "commodities" and that the "demand for commodities" will have to be described, not as a simple quantity, but as a demand schedule or curve describing the quantities of consumers' goods that will be bought at different prices.
- Secondly, the test of whether demand for consumers' goods "is" demand for labour (or, we may say, demand for pure input) must clearly be whether a rise in[a shift of] demand curve for consumers' goods raises[shifts] the demand curve for pure input (and whether a lowering of the former lowers the latter), or whether a change in the demand for consumers' goods causes no change in the same direction or perhaps even a change in the opposite direction to the demand for pure input.
It remains to decide in terms of what we are going to measure the two kinds of demand. And it will presently be seen that this decision is indeed crucial for the solution of our problem.
We see, therefore, that if we treat the problem in real terms and in its simplest forms, an increase in the demand for consumers' goods not only does not increase but actually decreases the demand for labour.[※ 소비재 수요의 증가가 노동 수요를 떨어뜨린다(!)] And we obtain of course the same result if we approach the problem more specifically from the point of view of the theory of capital. From this point of view the real demand for labour will depend on its marginal productivity, which in turn will increase and decrease with the "supply of capital", that is with that part of the total available resources which people in general do not want to consume currently but devote to production for the future. And increase in the share of the resources at their command which they devote to current consumption, any increase in the demand for consumers' goods, therefore means a decrease in the supply of capital and consequently a decrease in the productivity of labour and the amount of labour that will be demanded at any given real wage.
The doctrine still retains its validity, in so far a the effect on the real demand for labour is concerned, if we merely introduce money into the picture but assume an equilibrium position in which the supply of all factors equals demand (i.e. in which there are no unemployed resources). The mechanism by which in such a system an increase in final demand will decrease the demand for labour is somewhat more complicated, but still fundamentally the same. Is is easiest to show if we assume that the increase in the demand for consumers' goods occur in a system which before has been in stationary equilibriumㅡalthough the argument applies also when this condition is not satisfied. We shall assume that the initial increase in demand is brought about by a net increase in total money expenditure (involving either dishoarding or an increase in the quantity of money), since otherwise the increase in expenditure on consumer's goods would simply mean a simultaneous decrease in the outlay on factors of production (mixed input). Such an increase in the monetary demand for consumers' goods will in the first instance bring about a rise in the prices of consumers' goods which undoubtedly will to some extent be transmitted to the demand for pure input. But for obvious reasons, discussed fully above in Chapter 27, the money price of pure input and of labour in particular can (under the conditions of full employment assumed) never rise in full porportion to the rise in final demand, since some part of the available output will have to be used to satisfy the addtional new demand and the real remuneration of the pure input will have to be reduced by the amount of this new demand, that is, real wages will fall. It has been showen in the chapter just referred to how in turn this fall in "real wages" will lead to such a reorganizatin of production as to reduce the marginal productivity of labour (and pure input generally) all round (by using it in combination with proportionately less capital) so that with the lower real wages a new equilibrium will be reached. This lower real wage will now be the only wage rate at which, with the reduced supply of capital (or, what amounts to the same thing, the increased urgency in the demand for consumers's goods), the whole supply of labour will be employed. If in these conditions labour should insist on unchanged real wages and succeed in raising its money wage accordingly, the result can only be that less labour than formerly will be employed.
The situation will, of course, be different if at the pre-existing level of wages and prices supply exceeded demand, and an increase in final demand makes it possible immediately and proportionately to increase output by employing formerly unemployed resources of all the kinds required. In this case, and in this case only, an increase in final demand will lead to a proportionate increase of employment, and this effect will of course be limited to the period during which such unemployed reserves are available. There will of course be intermediate cases where, although there may not be unemployed resources of all kinds available, there will be sufficient reserves in existence of a number of the more important kinds of input to make it possible to increase output, although not in proportion to the increase in final demand, yet to some extent. In this case a very slight reduction of real wages may be accompanied by a very considerable increase in employment. In both these cases the "principle of derived demand" will approximately apply if money wages can be assumed to be given and constant, because the effect of an increase in final demand will here not dissipate itself in an increase in the prices of output andㅡto a lesser extentㅡinput, but can bring about an increase in employment at more or less unchanged prices.
That under conditions of under-employment the general principle does not directly apply was of course well known to "orthodox" economists, and to J.S. Mill in particular. In his exposition the statement that "industry is limited by capital", on which, as we have seen, the proposition under discussion is based, is immediately followed by the further statement that it "does not always come up to that limit"[1] And few competent economists can even have doubted that, in positions of disequilibrium where unused reserves of resources of all kinds existed, the operation of this principle is temporarily suspended, although they may not always have said so.[2] But while this neglect to state an important qualification is regrettable and may mislead some people, it involves surely less intellectual confusion than the present fashion of flatly denying the truth of the basic doctrine which after all is an essential and necessary part of that theory of equilibrium (or general theory of prices) which every economist uses if he tries to explain anything. The result of this fashion is that economists are becoming less and less aware of the special conditions on which their arguments are based, and that many now seem entirely unable to what will happen when these conditions cease to exist, as sooner or later they inevitably must. More than ever it seems to me to be true that the complete apprehension of the doctrine that "demand of commodities is not demand for labor"ㅡand of its limitationsㅡis "the best test of an economist".
- (1) If we decide to measure demand in terms of money, the problem will clearly be indeterminate unless we make further assumptions with regard to the effect of a change in final demand on expectations of future prices and on the supply of money. Circumstances are clearly conceivable in which an increase in final demand will bring about an increase in the demand for labour (in terms of money) many times its size. This indeed is the case which is treated as the normal one by the "acceleration principle of derived demand".
- (2) If, on the other hand, we decide to measure demand in real terms, as we clearly ought to do so long as we treat the proposition as one of pure theory, it will quickly be seen that the opposite proposition becomes almost a pure tautology. An increase in the demand for consumers' goods in real terms can only mean an increase in terms of things other than consumers' goods; either more capital goods or more pure input or both must be offered in exchange for consumers' goods and their price must be offered in exchange for consumer' goods, and their price must consequently rise in terms of these other things; and similarly a change in the demand for labour (i.e. pure input) in real term must mean a change of demand either in terms of consumers' goods or in terms of capital goods or both, and the price of labour expressed in these terms will rise. But since it is probably clear without further explanation that if the demand for capital goods in terms of consumers' goods falls, the demand for labour in terms of consumers' goods must also fall (and vice versa), and that if the demand for labour in terms of capital goods rises(or falls) it must also rise (or falls) in terms of consumers' goods, we can leave out the capital goods for our purpose and conclude that an increase in the real demand for consumers' goods can only mean a fall in the price of labour in terms of consumers' goods, or that, since an increase in the demand for consumers' goods in real terms must be an increase in terms of labour, it just means a decrease in the demand for labour in terms of consumers' goods.
We see, therefore, that if we treat the problem in real terms and in its simplest forms, an increase in the demand for consumers' goods not only does not increase but actually decreases the demand for labour.[※ 소비재 수요의 증가가 노동 수요를 떨어뜨린다(!)] And we obtain of course the same result if we approach the problem more specifically from the point of view of the theory of capital. From this point of view the real demand for labour will depend on its marginal productivity, which in turn will increase and decrease with the "supply of capital", that is with that part of the total available resources which people in general do not want to consume currently but devote to production for the future. And increase in the share of the resources at their command which they devote to current consumption, any increase in the demand for consumers' goods, therefore means a decrease in the supply of capital and consequently a decrease in the productivity of labour and the amount of labour that will be demanded at any given real wage.
The doctrine still retains its validity, in so far a the effect on the real demand for labour is concerned, if we merely introduce money into the picture but assume an equilibrium position in which the supply of all factors equals demand (i.e. in which there are no unemployed resources). The mechanism by which in such a system an increase in final demand will decrease the demand for labour is somewhat more complicated, but still fundamentally the same. Is is easiest to show if we assume that the increase in the demand for consumers' goods occur in a system which before has been in stationary equilibriumㅡalthough the argument applies also when this condition is not satisfied. We shall assume that the initial increase in demand is brought about by a net increase in total money expenditure (involving either dishoarding or an increase in the quantity of money), since otherwise the increase in expenditure on consumer's goods would simply mean a simultaneous decrease in the outlay on factors of production (mixed input). Such an increase in the monetary demand for consumers' goods will in the first instance bring about a rise in the prices of consumers' goods which undoubtedly will to some extent be transmitted to the demand for pure input. But for obvious reasons, discussed fully above in Chapter 27, the money price of pure input and of labour in particular can (under the conditions of full employment assumed) never rise in full porportion to the rise in final demand, since some part of the available output will have to be used to satisfy the addtional new demand and the real remuneration of the pure input will have to be reduced by the amount of this new demand, that is, real wages will fall. It has been showen in the chapter just referred to how in turn this fall in "real wages" will lead to such a reorganizatin of production as to reduce the marginal productivity of labour (and pure input generally) all round (by using it in combination with proportionately less capital) so that with the lower real wages a new equilibrium will be reached. This lower real wage will now be the only wage rate at which, with the reduced supply of capital (or, what amounts to the same thing, the increased urgency in the demand for consumers's goods), the whole supply of labour will be employed. If in these conditions labour should insist on unchanged real wages and succeed in raising its money wage accordingly, the result can only be that less labour than formerly will be employed.
The situation will, of course, be different if at the pre-existing level of wages and prices supply exceeded demand, and an increase in final demand makes it possible immediately and proportionately to increase output by employing formerly unemployed resources of all the kinds required. In this case, and in this case only, an increase in final demand will lead to a proportionate increase of employment, and this effect will of course be limited to the period during which such unemployed reserves are available. There will of course be intermediate cases where, although there may not be unemployed resources of all kinds available, there will be sufficient reserves in existence of a number of the more important kinds of input to make it possible to increase output, although not in proportion to the increase in final demand, yet to some extent. In this case a very slight reduction of real wages may be accompanied by a very considerable increase in employment. In both these cases the "principle of derived demand" will approximately apply if money wages can be assumed to be given and constant, because the effect of an increase in final demand will here not dissipate itself in an increase in the prices of output andㅡto a lesser extentㅡinput, but can bring about an increase in employment at more or less unchanged prices.
That under conditions of under-employment the general principle does not directly apply was of course well known to "orthodox" economists, and to J.S. Mill in particular. In his exposition the statement that "industry is limited by capital", on which, as we have seen, the proposition under discussion is based, is immediately followed by the further statement that it "does not always come up to that limit"[1] And few competent economists can even have doubted that, in positions of disequilibrium where unused reserves of resources of all kinds existed, the operation of this principle is temporarily suspended, although they may not always have said so.[2] But while this neglect to state an important qualification is regrettable and may mislead some people, it involves surely less intellectual confusion than the present fashion of flatly denying the truth of the basic doctrine which after all is an essential and necessary part of that theory of equilibrium (or general theory of prices) which every economist uses if he tries to explain anything. The result of this fashion is that economists are becoming less and less aware of the special conditions on which their arguments are based, and that many now seem entirely unable to what will happen when these conditions cease to exist, as sooner or later they inevitably must. More than ever it seems to me to be true that the complete apprehension of the doctrine that "demand of commodities is not demand for labor"ㅡand of its limitationsㅡis "the best test of an economist".
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