That sentence is just stupid. We have a functioning economy -- only it might function a little better. Flexible wages may (just may) be good for the 'economy' (never proven) but are bad for the 'flexible'. 

======================================================
From Avner Offer, Chichele Professor Emeritus of Economic History, University of Oxford
  All Souls College, High St., Oxford OX1 4AL, tel. 44 1865 281404
 email: [log in to unmask]
 personal website:
 http://sites.google.com/site/avoffer/avneroffer
________________________________________
From: Societies for the History of Economics [[log in to unmask]] on behalf of Robert Leeson [[log in to unmask]]
Sent: 28 March 2014 04:14
To: [log in to unmask]
Subject: [SHOE] “we shall not get a functioning econo my until wages again become flexible”

Could someone justify the assertion that “we shall not get a functioning economy until wages again become flexible.”

If wages are rigid or above equilibrium, an economy may become, in places, more productive: incentives will encourage the employment of more capital and less labour. This may increase unemployment - which causes policy problems - but how is this dysfunctional as opposed to sub-optimal?

RL