Pigou’s Theory of Unemployment: what “classical” macroeconomics really was

Massimo Di Matteo

No 4_2013, STOREPapers from Associazione Italiana per la Storia dell'Economia Politica - StorEP

Abstract: The paper is centred on Pigou’s core framework of Theory of Unemployment (TU) and his arguments on the determinants of unemployment in the short period are discussed. I will show what actually are the implicit assumptions in TU on the behavior of the non wage earners in the non wage sector. Pigou’s argument is further clarified via a simple model in the Appendix. It is also argued that classical and neoclassical schools were rather close in viewing the problem of the (un)employment determination, making almost right the label (“classical”) Keynes gave to his predecessors.

Keywords: Pigou; classical theory of unemployment; neoclassical theory of unemployment; wage fund; two sector economy (search for similar items in EconPapers)
JEL-codes: B22 B31 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2013
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