Exit Lucas, Reenter Keynes

Mohammad Osman Gani ()

Macroeconomics from EconWPA

Abstract: Keynes (1936) said that shortage of money caused by hoarding or failure to invest led to unemployment, but Lucas (1972) said that money does not affect unemployment. The tables have now turned. Gani (2003) produced a model of indirect trade in which money is necessary as a means of payment. Involuntary unemployment occurs under indirect exchange, just when the demand for labor is equal to supply, and the wage rate is precisely the market-clearing one, if and only the necessary money as a means of payment is missing. This seems impossible to those who think of money as merely a numeraire, or a store of value. But if money is a means of payment, then it must be used even when price is right. The relevant new graph drives neutrality away.

Keywords: Neutrality; Unemployment; Macroeconomics; Interest; Means of Payment; Circulation of Money. Keynes; Lucas; Mises; Leontief. (search for similar items in EconPapers)
JEL-codes: E10 E24 E30 E40 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pke
Date: 2004-05-23
Note: Type of Document - pdf; pages: 6. Just see how a payment circuit vividly destroys New Classical Macro and rescues Keynes.
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0405022

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