Have the Early Coordination Failures Models Achieved Keynes's Programme ?
(2004)
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- Abstract
- The aim of this paper is to assess how three seminal coordination failure models (Diamond ([1982] 1991), Howitt (1985) and Roberts (1987)) have fared against `Keynes's programme'. The first part of the paper characterises Keynes's programme as consisting of the following four objectives: (a) demonstrating the existence of involuntary unemployment, (b) demonstrating that wage rigidity can be exonerated as its cause, (c) giving a general equilibrium interdependency explanation of the phenomenon within a perfect competition framework, and (d) demonstrating that demand stimulation is the proper remedy to suppress involuntary unemployment. In a second part, I claim that no correct assessment of Keynes's programme can be made without drawing a distinction between involuntary unemployment and underemployment. These prerequisites being settled, in part three I undertake the study of the three models to conclude that none of them succeed in achieving Keynes' programme in its entirety. In the last part of the paper, I raise the issue as to whether Keynesian economists should continue to fight for the involuntary unemployment concept.
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De Vroey, M. (2004). Have the Early Coordination Failures Models Achieved Keynes’s Programme ? (ECON Working Papers 2004/48). https://hdl.handle.net/2078.5/130263