Monetary Economics, Banking and Policy

4 Keynes on individual behaviour and the possibility of involuntary unemployment equilibrium

Roy J. Rotheim¹

DOI: 10.4324/9781003142317-5

Introduction and context

The accepted conventional wisdom in the economics discipline addressing the nature, types, and remedies for unemployment can be framed in terms of the following narrative: Begin at the market clearing equilibrium in a or the labour market, either at the level of the firm and industry or for the economy as a whole, where independent job seekers and job creators converge in conjunction with an equilibrium real wage. It makes no difference whether a or the labour market is considered; they both follow the logic. Impose an exogenous shock on these equilibria either in terms of a change ...