The Contributions of Marx, Keynes and Kalecki
Chapter 5: Keynesian Underemployment Equilibria
5.1 INTRODUCTION We saw in the previous chapter that, on some occasions, Keynes directly dealt with the problem of crises in a way that was not too dissimilar from Marx’s approach.1 However, Keynes’s main concern was not the analysis of crises.2 Keynes wanted to show that the economy may experience underemployment equilibria, that is to say situations in which the economy experiences unemployment of labour and underutilization of capacity, but where there is no signiﬁcant market perturbation and no force at work pushing towards full employment of labour and capital. This is a fundamental difference between Keynes and Marx. Not only did Marx concentrate on crises and take little interest in equilibrium but, as we saw in Chapter 3, his analysis cannot be developed to provide a satisfactory explanation of rest states (equilibria) characterized by a persistent situation of underemployment of labour and capital. This chapter is devoted to examining how Keynes arrived at the conclusion that underemployment equilibria can exist. This is done by considering the microeconomic foundations of Keynes’s macroeconomics. The differences from Marx’s microfoundations emerge clearly. The chapter is organized as follows. Section 5.2 deals with Keynes’s position concerning the prevailing market form in which ﬁrms operate. It is argued that Keynes essentially based his analysis on the hypothesis of (Marshallian) perfect competition. Section 5.3 looks at Keynes’s microfoundations in the competitive context deﬁned in the previous section. Section 5.4 takes into consideration the relation of the equilibrium conditions at the micro level to those...
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