Labor market in Keynes and the role of rigid nominal wages

ABSTRACT

This paper discusses the statement that the Keynesian Theory would be “a particular case of the Classical Theory with rigid wages”. It examines whether Keynesian analysis depends on the rigidity hypothesis and to what extent the referred hypothesis has actually been used in The General Theory. The Neoclassical Labor Market is criticized. The Keynesian Theory of Employment, the Pigou’s Reply and the Neoclassical Synthesis are also examined. The analysis of the method applied in the General Theory of Employment, Interest and Money - a static method of a dynamic process - leads to the conclusion that its ideas represented a complete revolution on the economic thought prevailing before its publication.

KEYWORDS:
Keynesianism; wage determination; wage rigidity; history of economic thought; equilibrium