ABSTRACT
Keynes’s demonstration in Chapter 2 of the General Theory that there could be involuntary unemployment in a capitalist economy, as we have mentioned, involves the notion that the major determinant of prices, as it is the major determinant of costs, is the level of money wages. This is a type of “mark-up” pricing, though the mark-up multiplier in Keynes’s case = 1 under Keynes’s assumption of “perfect” competition. To uphold mark-up pricing as a way to have prices as determined by money wages, as Keynes wanted, rather than by the quantity of money, it is also necessary to ensure the independence of money wages from quantity theory factors.
