The (neo)classic postulates of employment and the determination of wages in Keynes

Luiz Miranda ()

Brazilian Journal of Political Economy, 1991, vol. 11, issue 4, 524-544

Abstract: This article deals with Keynes’ contribution on the recovering of the income and employment levels of growth. Contrary to the (neo) classical approach, Keynes argues that unemployment and the fall of nominal wages are not necessary to economic recovering. Even with fixed nominal wages and increasing primary costs, economic growth on the short run, via effective demand expansion allows firms to maximize their profits through the reduction of the real wage caused by the increase of general price level. On Keynes’ view, the incompatibility between the sus-taining of real wage level and the short run economic recovering arises from his critical refor-mulation of the principle of decreasing returns, as stated by the (neo) classical theory of produc-tion costs and supply prices. However, still in a Keynesian perspective, this incompatibility, if taken for granted it is not a theoretical request for the analysis of economic growth on the long run. JEL Classification: B22; B31.

Keywords: History of economic thought; Keynes (search for similar items in EconPapers)
Date: 1991
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