Keynesian and Classical Unemployment: A False Distinction
Author(s)
Bhaduri, Amit
Abstract
Although the distinction between “Classical” and “Keynesian” unemployment has been widely accepted among economists, this paper shows why such a distinction fails to be economically helpful. There is no logically secure way of classifying unemployment according to the level of real wage. Thus, we cannot, on reasonable assumptions, postulate that deficient demand and Keynesian unemployment is associated with relatively “low” real wage; or obversely, relatively “high” real wage appreciates “classical” unemployment through high production costs. The argument is shown to be especially relevant in the case of an open economy.
