Keynes's Theory Of Involuntary Unemployment

Involuntary unemployment is a neat phrase. It is the notion that one, despite having the proper skills, bodily-health and desire to work, can be thrown out of employment. If one were to believe that having a capitalistic system necessitates involuntary unemployment, that would put you firmly in the laissez-faire camp of the classical economists. It was exactly this school of thought which Keynes did intellectual battle with. Keynes saw classical economic thought as an imperfect, to say the least, form of capitalism. Thus, at heart, Keynes is building upon classical economic thought from the onset. Keynes sought to perfect capitalism in order defeat Marxism, and all of the schools of thought which it spawned. The idea that involuntary unemployment …show more content…
Consequently, if the wealthy are pouring all of their capital into their businesses, more jobs will always be available for laborers. Keynes does not argue against involuntary unemployment on the basis that it is wrong, he likely couldn’t have cared less, Keynes argues that during a downturn in the business cycle in a poorly managed capitalistic system the unwashed masses of the involuntarily unemployed might very well decide to have a revolution. The worker’s revolution, Keynes rightly imagined, would not have treated the capitalists, nor aristocrats, too kindly. Thus, in order to avoid the mounting of aristocratic and capitalistic heads upon pikes, the system should be reformed to employ those who are qualified for and desire employment. Most of the economists following Smith in the school of classical economic, notably David Ricardo, that Smith’s moral sentiments were not in fitting with the field of economics, and abandoned Smith’s moral reasoning. In its place, we are left with the iron law of wages (Ricardo 5), which states that in the long run real wages will trend downwards towards the minimum required for worker subsistence. This implies that due to the intricate relationship between supply and demand of labor, that there will always be involuntary unemployment due to surplus …show more content…
Keynes rightly saw that unemployed workers are wasting millions of hours that they otherwise could have spent producing things, things which could then be sold at a profit. A profit which could then be invested in further means of production. This cycle was called the multiplier effect. The idea that capitalism could grow ad infinitum, while giving workers higher wages was a Keynesian concept. Likewise, was the notion that higher wages would be able to support sustained consumer demand, i.e. it was Keynes who said that wages could drive