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Major RecessionsBritain and the World 1920-1995$
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Christopher Dow

Print publication date: 2000

Print ISBN-13: 9780199241231

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199241236.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 17 January 2021

The Causal Structure of the Economy

The Causal Structure of the Economy

(p.38) 3 The Causal Structure of the Economy
Major Recessions

Christopher Dow

Oxford University Press

Any such study as this one on recessions necessarily makes assumptions about the causal structure of the economy, and about the nature of underemployment or overfull employment. These involve much‐argued theoretical questions, and this chapter discusses three of the issues concerned: Sect. 3.1 states assumptions about the basic causal structure of the economy; Sect. 3.2 considers the continuing shift implicit in steady growth in the price of factor input relative to that of output, and how this mechanism operates; Sect. 3.3 discusses the phenomenon of persistent underemployment, which it argues is a stable state, which implies that the economy lacks any general power of self‐adjustment of the sort that would restore high employment. The discussion is more heterodox than novel, since defining the assumptions that are made involves taking a view on a number of controversial issues. There are two short appendices: Appendix A3.l is a note on the theoretical discussion about the features of the economic system that allow the possibility of unemployment; Appendix A3.2 summarizes the case against the High Real Wage theory of unemployment.

Keywords:   causal structure of the economy, economic structure, employment, factor input, factor output, full employment, high employment, High Real Wage theory, input, output, overfull employment, prices, underemployment, unemployment

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