Revolution and Counter-Revolution: Two Views of Unemployment

S P Chakravarty and R Ross MacKay

Cambridge Journal of Economics, 1999, vol. 23, issue 3, 337-51

Abstract: There is a view in economics that Keynes did not have a microeconomic theory underpinning his explanation of macroeconomics. For example, Friedman (1970) even goes so far as to maintain that prices are arbitrary in Keynes's approach to economics. The conclusion which follows from this critique of Keynes is that Keynesian economics cannot explain the occurrence of unemployment in a market economy except by invoking ad hoc assumptions. It is argued in this paper that the above critique is based on a misunderstanding of the focus of the Keynesian explanation of unemployment. The focus in Keynes is not choice, but exclusion from choice. In conventional microeconomics, the concept of choice is not considered problematic. The observation that a particular action is taken is confused with the view that the action is voluntarily chosen. The Keynesian explanation entails an exploration of what the concept of voluntary choice means. Copyright 1999 by Oxford University Press.

Date: 1999
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