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Macroeconomics and the Choice of Technique: Long-Period Coherence and the "Keynes Effect"

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  • White, G.

Abstract

A important part of mainstream economic belief in the ability of price and wage flexibility to eliminate unemployment has been the so-called Keynes effect, viz., downward flexibility in prices and wages reducing interest rates and stimulating effective demand. Yet, the theoretical real wage -interest rate relation underlying this effect appears to be incompatible with the long-period relation between these variables in a capitalist economy. Moreover, at least in terms of a Sraffa-Keynes framework, the relation between the rate of interest and employment cannot be assumed to be monotonically inverse in the presence of alternative techniques of production.

Suggested Citation

  • White, G., 1997. "Macroeconomics and the Choice of Technique: Long-Period Coherence and the "Keynes Effect"," Working Papers 9712e, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:9712e
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    Cited by:

    1. Graham White, 1999. "Rethinking Kalecki on the Trend and Cycle," Review of Political Economy, Taylor & Francis Journals, vol. 11(3), pages 341-353.

    More about this item

    Keywords

    ECONOMIC THOUGHT ; MACROECONOMICS;

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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