Abstract
This paper shows that Keynes’s involuntary unemployment derives from Walras’s voluntary unemployment by means of changing the characteristic of the aggregate supply curve (function) of labour. On the one hand, when the original aggregate supply function is a strong-ly increasing function, as in Walras’s approach, there might only be voluntary unemployment, and its magnitude is the difference between the available quantity of labour and the equilibrium point. On the other hand, if the supply curve of labour is a weakly increasing one, which means that the supply function may have a horizontal segment, then there might be involuntary unemployment if the equilibrium point is located be-tween boundary points of the horizontal segment, and the magnitude of involun-tary unemployment is the difference between the right boundary point of the hori-zontal segment and an equilibrium point. According to Walras’s approach, “forced unemployment” might also might be considered, which is the result of the intervention of external forces (government, monopoly, trade unions, and so on) into the market, and is therefore a disequilibrium phenomenon.
Highlights
This paper shows that Keynes’s involuntary unemployment derives from Walras’s voluntary unemployment by means of changing the characteristic of the aggregate supply curve of labour
This paper demonstrates that Keynes established the following main characteristics of a general definition of involuntary unemployment: 1. It is an equilibrium phenomenon; 2
On the one hand, when the original aggregate supply function is a strongly increasing function, as in Walras’s approach, there might be only voluntary unemployment, and its magnitude is the difference between the available quantity of labour and the equilibrium point
Summary
This paper shows that Keynes’s involuntary unemployment derives from Walras’s voluntary unemployment by means of changing the characteristic of the aggregate supply curve (function) of labour. On the one hand, when the original aggregate supply function is a strongly increasing function, as in Walras’s approach, there might be only voluntary unemployment, and its magnitude is the difference between the available quantity of labour and the equilibrium point. In such a case, an individual is unemployed according to his own wishes, because the equilibrium wage defined by free competition is less than the wage which he requires. The third section considers Keynes’s definition of full, voluntary and involuntary unemployment, and demonstrates how Keynes’s vague and incomplete definition of these categories causes serious confusion in the theory of post-Keynes economists.
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