N rO REMEDY for depression has been more frequently urged than a general reduction in wage-rates. There are many businessmen and some economists who hold that when labor is unemployed it is because labor is asking too much for its contribution to production. It is not always clear how a general reduction in wages is expected to bring about an increase in employment. One basis for this view is the fact that a reduction in wage-rates in a particular industry results in a decline in costs and in prices in that industry, and induces an expansion of demand for its product. Disregarding the fallacy of composition, it is assumed that what is true of a reduction in wage-rates in one industry is equally true of a reduction in wage-rates in all industries.' The familiar reply to this analysis is that a general reduction in wages would diminish the income of the community and the demand for goods at a given level of prices, so that the volume of goods sold at lower prices would not be greater. There would then be no reason to increase production and employment. Recently Professor Pigou has presented the view that a general reduction in wage-rates would increase employment through its