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Keynes's Employment Function and the Gratuitous Phillips Curve Disaster

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  • Egmont Kakarot-Handtke

Abstract

Keynes had many plausible things to say about unemployment and its causes. His "mercurial mind," though, relied on intuition, which means that he could not strictly prove his hypotheses. This explains why Keynes's ideas immediately invited bastardizations. One of them, the Phillips curve synthesis, turned out to be fatal. This paper identifies Keynes's undifferentiated employment function as a sore spot. It is replaced by the structural employment function, which also supersedes the bastard Phillips curve. The paper demonstrates in a formal and rigorous manner why there is no trade-off between price inflation and unemployment.

Suggested Citation

  • Egmont Kakarot-Handtke, 2013. "Keynes's Employment Function and the Gratuitous Phillips Curve Disaster," Economics Working Paper Archive wp_773, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_773
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    References listed on IDEAS

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    1. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-1171, September.
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    3. Johannes J. Klant, 1994. "The Nature Of Economic Thought," Books, Edward Elgar Publishing, number 262.
    4. Forder, James, 2010. "Friedman’S Nobel Lecture And The Phillips Curve Myth," Journal of the History of Economic Thought, Cambridge University Press, vol. 32(3), pages 329-348, September.
    5. Robert E. Hall, 2011. "The Long Slump," American Economic Review, American Economic Association, vol. 101(2), pages 431-469, April.
    6. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    7. Kakarot-Handtke, Egmont, 2012. "The rhetoric of failure: a hyper-dialog about method in economics and how to get things going," MPRA Paper 43276, University Library of Munich, Germany.
    8. Marek Hudik, 2011. "Why economics is not a science of behaviour," Journal of Economic Methodology, Taylor & Francis Journals, vol. 18(2), pages 147-162.
    9. Kakarot-Handtke, Egmont, 2011. "Keynes’s missing axioms," MPRA Paper 32742, University Library of Munich, Germany, revised 11 Aug 2011.
    10. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    11. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, April.
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    Cited by:

    1. Kakarot-Handtke, Egmont, 2013. "Toolism! A Critique of Econophysics," MPRA Paper 46630, University Library of Munich, Germany.
    2. Kakarot-Handtke, Egmont, 2013. "Settling the theory of saving," MPRA Paper 44479, University Library of Munich, Germany.
    3. Kakarot-Handtke, Egmont, 2013. "Understanding Profit and the Markets: The Canonical Model," MPRA Paper 48691, University Library of Munich, Germany.
    4. Kakarot-Handtke, Egmont, 2012. "Taxes, profits, and employment: a structural axiomatic analysis," MPRA Paper 43581, University Library of Munich, Germany.
    5. Ying Liang & Runxia Cao, 2015. "Employment assistance policies of Chinese government play positive roles! The impact of post-earthquake employment assistance policies on the health-related quality of life of Chinese earthquake popul," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 120(3), pages 835-857, February.

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    More about this item

    Keywords

    New Framework of Concepts; Structure-centric; Axiom Set; Say's Regime; Keynes's Regime; Market Clearing; Full Employment; Product Price Flexibility; Intertemporal Budget Balancing; Multiplier; Trade-Off; Price Inflation; Wage Inflation;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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