And it appears that, for reasons which are not yet clear, these factors taken in conjunction have no significant influence on the distribution between labour and capital of the income resulting from the output. Whatever a more complete inquiry into the problem may bring forth, it is evident that Mr Dunlop, Mr Tarshis and Dr Kalecki have given us much to think about, and have seriously shaken the fundamental a.s.sumptions on which the short-period theory of distribution has been based hitherto;? it seems that for practical purposes a different set of simplifications from those adopted hitherto are preferable. Meanwhile I am comforted by the fact that their conclusions tend to confirm the idea that the causes of short-period fluctuation are to be found in changes in the demand for labour, and not in changes in its real-supply price; though I complain a little that I in particular should be criticised for conceding a little to the other view by admitting that, when the changes in effective demand to which I myself attach importance have brought about a change in the level of output, the real-supply price for labour would in fact change in the direction a.s.sumed by the theory I am opposing?as if I was the first to have entertained the fifty-year-old generalisation that, trend eliminated, increasing output is usually a.s.sociated with a falling real wage.

I urge, nevertheless, that we should not be too hasty in our revisions, and that further statistical enquiry is necessary before we have a firm foundation of fact on which to reconstruct our theory of the short period. In particular we need to know: (i) How the real hourly wage changes in the short period, not merely in relation to the money wage, but in relation to the percentage which actual output bears to capacity output; (ii) How the purchasing power of the industrial money wage in terms of its own product changes when output changes; and (iii) How gross profit per unit of output changes (a) when money costs change, and (b) when output changes.

J. M. KEYNES.

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