Blanchard’s WS-PS model

  1. In Blanchard’s WS-PS model, an increase in labor militancy or the mark-up must result in either a wage-price spiral or

a higher rate of unemployment. Use the WS-PS diagram to explain why this is true. To what extent does this describe and

characterize some of the problems of the 1970s? What “way out” is proposed by David Purdy in his essay, ”The Wages of

Militancy”? Use the WS-PS model to explain the logic of it.

2.Your instructor argues that Beveridge’s “Full Employment in a Free Society” is an expression of the cultural and ideological

hegemony of social democracy that emerged in the post-WW II world. Explain. Does the same ideology still

dominate today? If not, what has replaced it?

  1. Use the “laws of motion” for u and v from Goodwin’s model to derive “average” u and “average” v. Discuss the factors

that “determine” “average” u and v. Explain why Goodwin notes that these implications may contradict the gut feelings of

“trade unionists”. How can Goodwin, a Marxist, propound a model that may seem unsympathetic to labor union activity?

Hint: The laws of motion are

u_ = f-( + ) + vgu_

v =[{ 1 – ( + )}- u]v

  1. The “rational class consciousness” hypothesis is that in a class-based model, each class, besides being modeled, will

use the model to decide upon how it should act. Discuss the implications of this hypothesis when it is applied in the

Goodwin-Mehrling model.