Economics Dictionary of ArgumentsHome
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| Unemployment: Unemployment refers to the state of individuals willing and able to work but unable to find employment. It's typically measured as a percentage of the labor force actively seeking employment within an economy. This phenomenon impacts economic stability and social well-being. See also Social Policy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Keynesianism on Unemployment - Dictionary of Arguments
Rothbard III 778 Unemployment/free Market/Keynesianism/Rothbard: KeynesianismVsFree market: Therefore, the elaborate attempts of the Keynesians to demonstrate that free-market expenditures will be limited - that consumption is limited by the "function," and investment by stagnation of opportunities and "liquidity preference" - are futile. For even if they were correct (which they are not), the result would be pointless. There is nothing wrong with hoarding or dishoarding, or with "Iow" or "high" levels (whatever that may mean) of social money income. >Hoarding/Rothbard, >Consumption function/Keynesianism. Employment/unemployment: The Keynesian attempt to salvage meaning for their doctrine rests on one point and one point alone - the second major pillar of their system. This is the thesis that money social income and level of employment are correlated, and that the latter is a function of the former. This assumes that a certain "full employment" level of social income exists below which there is correspondingly greater unemployment. Rothbard III 780 The nub of the Keynesian critique of the free market economy (…) rests on the involuntary unemployment allegedly caused by too Iow a level of social expenditures and income. Problem: But how can this be, since we have previously explained that there can be no involuntary unemployment in a free market? >Free market/Rothbard, >Unemployment/Rothbard. Solution: The Keynesian "underemployment equilibrium" occurs only if money wage rates are rigid downward, i.e., if the supply curve of labor below "full employment" is infinitely elastic.(1) >Elasticity. Thus, suppose there is a "hoarding" (an increased demand for money), and social income falls. The result is a fall in the monetary demand curves for labor factors, as well as in all other monetary demand curves. >Hoarding/Rothbard. We would expect the general supply curve of labor factors to be vertical. Since only money wage rates are being changed while real wage rates (in terms of purchasing power) remain the same, there will be no shift in labor/leisure preferences, and the total stock of labor offered on the market will remain constant. At any rate, certainly no involuntary unemployment will arise. >Purchasing power/Rothbard. How then can the Keynesian case arise? How can the supply of labor remain horizontal at the old money wage rate? In only two ways: 1) if people voluntarily agree with the unions, which insist that no one be employed at Iower than the Old money wage rate. Since selling prices are falling, maintaining the old money wage rate is equivalent to demanding a higher real wage rate. We have seen above that the unions' raising of real wage rates causes unemployment. >Trade Unions/Rothbard. But this unemployment is voluntary, since the workers acquiesce in the imposition of a higher minimum real wage rate, below which they will not undercut the union and accept employment. Or 2) unions or government coercively impose the minimum wage rate. But this is an example of a hampered market, not the free market to which we are confining our analysis here. >Free Market/Rothbard, >Minimum wage/Rothbard. 1. Thus, see the revealing article by Franco Modigliani, "Liquidity Preference and the Theory of Interest and Money" in Hazlitt, Critics of Keynesian Economics, pp. 156-69. Also see the articles by Erik Lindahl, "On Keynes' Economic System - Part I," The Economic Record, May, 19 54, pp. 19-32; November, 1954, pp. 159-71; and Wassily W. Leontief, "Postulates: Keynes' General Theory and the Classicists" in S. Harris, ed., The New Economics (New York: Knopf, 1952), pp. 232-42. For an empirical critique of the assumed Keynesian correspondence between aggregate output and employment, see George W. Wilson, "The Relationship between Output and Employment," Review of Economics and Statistics, February, 1960, pp. 37-43._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Keynesianism Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Keynesianism
> Counter arguments in relation to Unemployment
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