The Equivalence between Involuntary Unemployment and Effective Demand-Deficiency in Keynesian Theory. A Critical Examination

Michel De Vroey

No 1995010, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Using a retrospective methodology, my paper examines critically the insights on involuntary unemployment offered by Keynes in his General Theory. Keynes, it is argued, gave involuntary unemployment a modern micro-founded definition yet –quite opportunely, in view of the difficulty of the task-did not attempt to provide a direct microeconomic explanation of it. Rather, his claim to the demonstration of its existence rests on an indirect argument, where involuntary unemployment emerges as the corollary of effective demand falling short of its full employment level. This justification is based on the more or less tacit assumption that involuntary unemployment and effective demand-deficiency are equivalent, which I dub the "equivalence claim". The latter allowed Keynes to believe that this result about demand-deficiency could be extended to involuntary unemployment. Whereas this claim has an undeniable appeal, constructing a robust argumentation in favor of it, abiding by neoclassical methodological standards, has proven to be a daunting task. Most definitely, its fulfillment is not to be found in the general theory. Nor has it been put forward during the following decades of Keynesian theory. Only recently, are some first signs of such a theoretical accomplishment becoming noticeable. This is shown in the light of a quick assessment of seminal Keynesian works.

JEL-codes: B22 E12 E24 (search for similar items in EconPapers)
Pages: 25
Date: 1995-02-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1995010

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().