Macroeconomics and the Choice of Technique: Long-Period Coherence and the "Keynes Effect"

G. White

Working Papers from University of Ottawa, Department of Economics

Abstract: A important part of mainstream economic belief in the ability of price and wage flexibility to eliminate unemployment has been the so-called Keynes effect, viz., downward flexibility in prices and wages reducing interest rates and stimulating effective demand. Yet, the theoretical real wage -interest rate relation underlying this effect appears to be incompatible with the long-period relation between these variables in a capitalist economy. Moreover, at least in terms of a Sraffa-Keynes framework, the relation between the rate of interest and employment cannot be assumed to be monotonically inverse in the presence of alternative techniques of production.

Keywords: ECONOMIC THOUGHT; MACROECONOMICS (search for similar items in EconPapers)
JEL-codes: B22 E11 E12 (search for similar items in EconPapers)
Pages: 40 pages
Date: 1997
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ott:wpaper:9712e

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