Friday, November 29, 2013

Frederic Lee on Real World Prices

Frederic S. Lee has a nice post here on the empirical evidence on real world price and wage setting:
Frederic S. Lee, “What if There Are No Conventional Price Mechanisms?,” New Economic Perspectives, November 26, 2013.
As Lee notes,
“since the 1930s, it has been known that price stability dominate the industrial, wholesale, and retail areas of the American economy. The 40–50 studies in the past fifteen years by Alan Binder and others which cover developed countries around the world further support the existence of price stability. One basis for its existence is the administered cost-plus pricing mechanism (used by virtually all business enterprises to set the prices) which neutralizes the impact of changing sales on costs hence prices.”

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