Macroeconomic Theory and the Great Depression Revisited

Michael Bleaney

Scottish Journal of Political Economy, 1987, vol. 34, issue 2, 105-19

Abstract: On the evidence of trade-cycle theory, pre-Keynesian macroeconomics recog nized that unemployment in depressions was involuntary in the sense o f not being caused by excessive real wages. But pre-Keynesian theory was ignorant of the notion of an effective demand constraint and advo cated measures to stimulate demand on the basis of their impact on ou tput decisions at the individual-firm level rather than on the level of aggregate demand. The widespread belief that pre-Keynesian economi cs did not recognize involuntary unemployment has caused confusion in the interpretation of economic policy in the early 1930s. Copyright 1987 by Scottish Economic Society.

Date: 1987
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