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The Fall and Rise of Keynesian Economics$
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John Eatwell and Murray Milgate

Print publication date: 2011

Print ISBN-13: 9780199777693

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199777693.001.0001

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Unemployment and the Market Mechanism

Unemployment and the Market Mechanism

(p.251) 12 Unemployment and the Market Mechanism
The Fall and Rise of Keynesian Economics

John Eatwell

Murray Milgate

Oxford University Press

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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