Full Employment: A Classical Assumption or Keynes's Rhetorical Device?

Abstract

Following Keynes's attribution of assumption of full employment to classics in General Theory (1936), it has become standard practice particularly in macroeconomics textbooks to identify classical economics' with that assumption. Among intermediate-level texts that repeat attribution are Abel and Bernanke [1, 426], Baily and Friedman [6, 443-44], Dornbusch and Fischer [14, 200-201], Froyen [17, 55], Galbraith and Darity [18, 44-45], Gordon [19, 165], McElroy [45, 41-51], and Sachs and Larrain [62, 55].2 Case and Fair [10, 349-50], Colander [12, 211], Samuelson and Nordhaus [63, 277], and Slavin [65, 219-20] are among introductory-level texts that state same claim. However, devising appropriate policies to raise standard of living, especially for poor, and also increase employment opportunities for a growing population were principal focus of classical economists. See, for example, Smith [66, 1:359-60, 372, 2:208], Ricardo [58, 1:386-97], Malthus [40, 231-40, 351-60], and Mill [46, 2:356-58]. Writing in tradition of classics, Alfred Marshall also was equally concerned about fate of poor and need to identify policies that would promote economic growth and their welfare.3 Indeed, Keynes recalls Marshall's own explanation of his transition from mathematics to economics as being influenced by his visits to the poorest quarters of several cities and [having] walked one street after another, looking at faces of poorest people on his vacations.4 Pigou [53] also firmly denies having employed full employment assumption as Keynes alleges. Indeed such an assumption would also be inconsistent with title of Pigou's 1933 book, The Theory of Unemployment. On other hand, Keynes's efforts to contrast classical arguments with his own charac