1. German Inflation as Distributional Conflict Tullio: Reichsbank reaction function reflects Adherence to real bills doctrine  meet the “needs of trade” Concern with full employment “Rational inflation”: Inflation beats the alternative Laursen and Pedersen Holtfrerich Keynesian inflation: Inflation as Wage – Price Spiral Demand as trigger Endogenous money: M s = f(M d ) … and V adjusts if M s doesn’t Joan Robinson’s review of Bresciani-Turroni’s Economics of Inflation Exchange Rate Shock  Depreciation Increased DemandIncreased Cost of Living Full EmploymentWage Demands Wages Up Budget Deficit Prices Up Tight Money  r  I  Y  u  W and P steady…but at what price?

2. Robinson: In hyperinflation, German Mark ceased to function as money There was no expectation of ongoing inflation in dollar prices Demand fell  Inflation ceased Inflation self-destructed, “blew itself to pieces.” Marxian aside: Inflation with wage lag eventually self-destructs Inflation  Profits up  Investm’t  Expansion  Reduced unempl  Wages Up {Graham and Bresciani-Turroni make similar observations}

3. Burdiken and Burkett (BB): Conflict over shares Wage as function of unemployment and expected inflation Unemployment as function of real wage Real wage as outcome of conflict – Ignore impact of inflation on union strike funds – Ignore impact of unemployment benefits on wage demands – Ignore impact of productivity on wage [productivity didn’t vary much for them] – Ignore war of attrition over 8-hour day, the ultimate distributional issue For workers: Nominal wage growth demanded increases with – Real wage aspiration gap/expected inflation/employment rate For firms: Price increases with – Excess of real wage over target (based on target markup)/expected inflation For economy: unemployment increases with increase in real wage growth – Real wage growth increases or decreases with expected inflation Depends on relative strengths of worker and firm responses to expected inflation – Real wage growth decreases with increase in unemployment rate – Real wage growth decreases with lagged wage increase Lagged wage increase reduces worker aspiration gap and increases firm aspiration gap

4. Burdiken and Burkett (BB): Econometric Concerns and Tests Test for stationarity of variables: ΔW… ΔW… Δu… ΔW… Δp e all pass {forward premium  p e } BB assume constant worker real wage and firm markup targets. Then ΔW =.09 +.15 Δu – 1.78 ΔW -1 – 2.61 ΔW -1 Δu -.92 Δp e – 1.90 Δp e Δu Δu = -.27 +.66 Δu -1 + 1.81 ΔW Test robustness of results…all pass Farley – Hinich tests BB Conclusions/Observations High unemployment of late 1923 broke back of wage-price spiral – Labor forced to concede 8 – hour day – {Labor lost the War of Attrition} It wasn’t expectation of stabilization following fiscal and monetary reforms (Sargent’s claim) It wasn’t the Dawes Loan Looking ahead to administered wages and prices of late Weimar Republic (1927 + ), unemployment ceased at act a disciplining device  Segue to Borchardt and German Slump: Wages Too High