upward pressure if it arose in such circumstances. His task is made easier by a less restrictive (but nonetheless crude) assumption concerning wage behaviour: let us simplify our assumptions still further, and assume... that the factors of production... are content with the same money-wage so long as there is a surplus of them unemployed... ; whilst as soon as full employment is reached, it will thenceforward be the wage-unit and prices which will increase in exact proportion to the increase in effective demand. Chapter 22: The trade cycle Keynes's theory of the trade cycle is based on 'a cyclical change in the marginal efficiency of capital' induced by 'the uncontrollable and disobedient psychology of the business world' (pp313, 317). The marginal efficiency of capital depends... on current expectations... But, as we have seen, the basis for such expectations is very precarious. Being based on shifting and unreliable evidence, they are subject to sudden and violent changes. Optimism leads to a rise in the marginal efficiency of capital and increased investment, reflected – through the multiplier – in an even greater increase in income until 'disillusion falls upon an over-optimistic and over-bought market' which consequently falls with 'sudden and even catastrophic force' (p316). There are reasons, given firstly by the length of life of durable assets... and secondly by the carrying-costs of surplus stocks, why the duration of the downward movement should have an order of magnitude... between, let us say, three and five years. And a half cycle of 5 years tallies with Jevons's sunspot cycle length of 11 years. Income fluctuates cyclically in Keynes's theory, with the effect being borne by prices if income increases during a period of full employment, and by employment in other circumstances. Wage behaviour and the Phillips curve Keynes's assumption about wage behaviour has been the subject of much criticism. It is likely that wage rates adapt partially to depression conditions, with the consequence that effects on employment are weaker than his model implies, but not that they disappear. Lerner pointed out in the 40s that it was optimistic to hope that the workforce would be content with fixed wages in the presence of rising prices, and proposed a modification to Keynes's model. After this a succession of more elaborate models were constructed, many associated with the Phillips curve. Keynes's optimistic prediction that an increase in money supply would be taken up by an