Unemployment, Justice, and Keynes's "General Theory"

Abstract

This paper has two purposes: First, it shows that Keynes's definition of "involuntary unemployment" and his policy recommendations in the General Theory (in particular, inflation) rely on a vague theory of justice. Thus the "generality" of the General Theory is questioned. Next the paper shows that the dynamic process described in the General Theory relies on the existence of nominal contracts in both the labor and the financial markets. The paper concludes that the IS-LM-type models have not much in common with the model presented in the General Theory.