Unemployment, Recession and Effective Demand

Unemployment, Recession and Effective Demand

The Contributions of Marx, Keynes and Kalecki

Claudio Sardoni

In the midst of the current world economic crisis, many claim there is a necessity to return to the Marxian and Keynesian traditions in order to better understand the dynamics of market economies. This book is an important step in that direction. It presents a critical examination of the foundations of macroeconomics as developed in the traditions of Marx, Keynes and Kalecki, which are contrasted with the current mainstream. Particular attention is given to the problem of market forms and their relevance for macroeconomics.

Appendix B: Effects of Wage Changes in Keynes’s Model

Claudio Sardoni

Subjects: economics and finance, history of economic thought, post-keynesian economics


Proposition 1 At p = p* and r = r*, it is ∂p/∂r > 0 From (5.14), let us consider the implicit function K(c, p, r, w) ≡ F (p, w) – M(c, p, r, w) = 0 From (5.8) and (5.11), and remembering that in equilibrium p = pe, M(c, p, r, w) can be also written as M(c, p, r, w) = cF (p, w) + cG(r, p, w, i, E) with G(r, p, w, i, E) = rI/p. Since it is ∂G/∂p < 0 and ∂G/∂r > 0, then ∂p∂r = – (∂K/∂r)/(∂K/∂p) = – [s(∂F/∂r) – c(∂G/∂r)]/[s(∂F/∂p) – c(∂G/∂p)] with s = (1 – c). Since it is ∂F/∂r = 0, ∂G/∂r > 0, [s(∂F/∂r) – c(∂G/∂r) > 0, [s(∂F/∂p) – c(∂G/∂p)] > 0, then ∂p/∂r > 0 Proposition 2 At p = p* and r = r*, it is (B.1) ∂r/∂w > 0 ∂p/∂w > 0 The sign of ∂r/∂w can be easily determined from (5.15). Let us consider the implicit function 154 Effects of wage changes in Keynes’s model 155 R(r, w, i, E) ≡ G(r, w) – H(r, i, E) = 0 It is ∂r/∂w = – (∂R/∂w)/(∂R/∂r) = – [(∂G/∂w) – (∂H/∂w)]/[(∂G/∂r) – (∂H/∂r)] = (∂G/∂w)/[(∂G/∂r) – (∂H/∂r)] as ∂H/∂w = 0. Since it is ∂G/∂w < 0, ∂G/∂r > 0 and ∂H/∂r < 0, ∂r/∂w > 0 (B.2) The sign of ∂p/∂w is immediately...

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