This chapter investigates the fundamental difference made by Keynes in the General Theory between voluntary unemployment, on the one hand, and involuntary unemployment, on the other. In Keynes, voluntary unemployment is very wide-ranging in that it corresponds to any form of imperfections in wage bargaining, inadequacy in qualifications and so on. In order to understand involuntary unemployment correctly, we have to leave aside the issue of a local reduction in nominal wage: the issue is the effect of a general fall in money-wages on the long-term state of expectations. Significantly, Keynes abandons this terminology after the General Theory and subsequently refers to the distinction between structural unemployment and demand-deficiency unemployment.
Strangely enough, the comparison between these two great economists is an issue that has not been addressed in depth until recently. By comparison with contemporary economists, there are significant points of convergence in the way Keynes and Friedman deal with macroeconomics: both are Marshallian in that their main matter of concern is for the dynamics of the economic system and both aim to understand the disequilibria that inevitably occur in a monetary economy. Also, without wishing to overlook the strong disagreements between the two at the political level, there are strong similarities in the way Keynes and Friedman each address the basic aim of economic policy as a way to stabilise private expectations.