An area in which the market routinely fails is price adjustment regarding wages. A shopkeeper quickly recognises when he has too much of a product and will lower its price accordingly. However, when there is a surplus labour supply, wages do not fall. Nominal wage rigidity, as we call it, is a cornerstone of Keynesian economics. It highlights the frustrating inflexibility of wages to adjust according to how much or little labour is available.

The necessary action is obvious, yet it is avoided by those who most lament the rigidity. First, governments should stop intervening, as policies like employer health care only further increase labour costs. In the face of high unemployment rates, salaries should be falling to increase the number of people companies can employ.

The problem is that Keynesians are left-of-centre, and to call for lower wages is anathema. It’s the straightforward solution to the supply-demand discrepancy. Perhaps if they care about people, they can swallow their pride.