And if they don't, should government make them do it? Will that create more employment at higher wages?

spend the $100 with Ralph. Ralph, seeing he has more demand will hire Lorene. Lorene will take her new wages and spend them with Joey. And, thus a virtuous demand cycle is kick started. This is not unlike Keynes ideas on aggregate demand and using govt to achieve full employment via govt stimulus of aggregate demand.

Sweet, no? Well, no it's not sweet as it omits a couple of key points: where does the initial funding come from and what about productivity.

First, Bob - first in our example - is out $100. Bob does not get $100 more product from Jean, Bob is simply ordered to pay Jean $100 more. That is now $100 that Bob does not have to spend with Wayne. So the demand increase on the front end is met with demand suppression on the back end.

Second, productivity is considered the road to increased standards of living. By employing labor and capital to achieve efficiency Bob will pay that extra $100 when Jean is able to produce so as to support the increase plus other costs plus profit. In that way both, Bob and Jean are better off; the money Jean spends is real; and Wayne doesn't get the economic shaft.