Price Flexibility and Full Employment: Losing the Plot?

Roy Grieve

Research output: Working paperDiscussion paper

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Abstract

This paper, from a historical perspective, questions the thesis (again in fashion) that price flexibility ensures full employment. The point is made that explanation of unemployment in terms of wage/price stickiness typified pre-Keynesian accounts, but not Keynes’s theory of involuntary unemployment. Under uncertainty, no set of prices consistent with full employment may actually exist: if so, price flexibility is not the critical factor. Finally, with respect to current use of the “AD/AS model”, we note that the strong arguments against attribution of necessarily beneficient effects to price and wage flexibility, which ought to be well-known, seem now to be forgotten.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-33
Number of pages33
Volume04
Publication statusPublished - 2004

Keywords

  • price flexibility
  • full employment
  • economics

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  • Cite this

    Grieve, R. (2004). Price Flexibility and Full Employment: Losing the Plot? (07 ed.) (pp. 1-33). University of Strathclyde.