Unemployment and the Market Mechanism
Unemployment and the Market Mechanism
This chapter analyzes the level of unemployment in a market economy and classifies the debates of the orthodox market-mechanism group with imperfectionists on the problem of unemployment. It begins by examining various interpretations of the notion of a self-adjusting market with respect to John Maynard Keynes’ own view of the market mechanism, followed by a description of the imperfectionist argument that implies unemployment is attributed to rigid or sticky money wages. The chapter concludes with a consideration of the debate over the natural rate/rational expectations hypothesis, in which the theoretical poverty of the imperfectionist position is revealed.
Keywords: market economy, orthodox market-mechanism group, imperfectionists, unemployment, self-adjusting market, John Maynard Keynes, sticky money wages
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