Milton Keynes UK Open Market…

1 Response to Milton Keynes UK Open Market…

1. Blaine G. Barrett says:

   15/05/2013 at 23:34

   The work served as a theoretical justification for the interventionist policies Keynes favoured for tackling a recession. The General Theory challenged the earlier neo-classical economic paradigm , which had held that provided it was unfettered by government interference, the market would naturally establish full employment equilibrium. In doing so Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a “special case” that applied only to the particular conditions present in the 19th century, his own theory being the general one. Classical economists had believed in Say’s law , which, simply put, states that ” supply creates its own demand “, and that in a free market workers would always be willing to lower their wages to a level where employers could profitably offer them jobs. An innovation from Keynes was the concept of price stickiness – the recognition that in reality workers often refuse to lower their wage demands even in cases where a classical economist might argue it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of “aggregate demand” and “aggregate supply” may lead to stable unemployment equilibria – and in those cases, it is the state, and not the market, that economies must depend on for their salvation.