Price Flexibility and Full Employment : Barking up the Wrong (Neoclassical) Tree

Grieve, Roy H (2016) Price Flexibility and Full Employment : Barking up the Wrong (Neoclassical) Tree. Discussion paper. University of Strathclyde, Glasgow.

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Abstract

This paper (a revised version of Strathclyde Paper 2004-07) questions the thesis (again in fashion) that price flexibility ensures full employment. (See most standard macro textbooks.) We make the point that explanation of unemployment in terms of price/wage stickiness typified much preKeynesian analysis, but not Keynes’s theory of involuntary unemployment. Under uncertainty - an essential aspect of the Keynes conception - no set of prices consistent with full employment may actually exist: if so, price inflexibility is not the critical obstacle to the attainment of full employment. Finally, with respect to current use of the AD/AS model, we note that once-rejected ideas have returned to the mainstream and that the strong arguments against attribution of necessarily beneficent effects to price and wage flexibility, which ought to be well-known, seem now to be forgotten.

  • Item type:Monograph(Discussion paper)
    ID code:68358
    Dates:
    Date
    Event
    2016
    Published
    Notes:Published as a paper within the Discussion Papers in Economics, No. 16-01 (2016)
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:11 Jun 2019 15:14
    Last modified:09 Apr 2024 04:43
    URI:https://strathprints.strath.ac.uk/id/eprint/68358
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