Revisiting the unemployment controversy: Pigou's viewpoint

Norikazu Takami

No 09-27, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examines the unemployment controversy between J. M. Keynes and A. C. Pigou, mainly from the latter's viewpoint. In this controversy, although he eventually conceded de- feat, Pigou attempted to prove that money wage cuts were effective on employment regardless of the level of interest rate. His defeat in the controversy was not due to the inconsistency in his perspective, but rather due to his inability to theorize a relevant notion, \forced anti- levies" as expounded in Industrial Fluctuations (1927). The \Pigou effect" devised later in 1943 could be considered as theorization of forced anti-levies. This allowed Pigou to formally demonstrate that money wage cuts were effective in increasing employment regardless of the level of interest rate. Thus, we conclude that the unemployment controversy was gainful at least to Pigou, resulting in the formulation of the notion originated in Industrial Fluctuations.

Keywords: Pigou; unemployment; macroeconomics; Pigou effect; Keynes (search for similar items in EconPapers)
JEL-codes: B22 B31 E24 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-08
New Economics Papers: this item is included in nep-hpe and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0927

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