ABSTRACT
Beginning with “Full employment by accident,” depicted in Figure 7.1, and ending with “Full employment by design,” depicted in Figure 8.4, we deal with the issues of market malady and fiscal fix in terms of the phases (peak-to-peak) of the business cycle. The sequence of cause and consequence is tailored to Keynes’s treatment of business cycles in Chapter 22 of the General Theory (1936, especially pp. 315ff.), and is offered as being true to Keynes except in one respect. Following modern convention, “cyclical unemployment” and “involuntary unemployment” are treated – for the time being – as synonymous. As already noted, Keynes’s involuntary unemployment consists of both a cyclical and a secular component. And it is the latter component, according to him, that has an overriding claim on our attention. Secular unemployment is a social tragedy; cyclical unemployment is a complication of secondary importance. Keynes’s mid-course summing-up chapter (Chapter 18, “The General Theory of Employment Re-stated”), puts the two components in perspective: consistent with
the outstanding features of our actual experience, . . . we oscillate, avoiding the gravest extremes of fluctuations in employment and in prices in both directions, round an intermediate position appreciably below full employment and appreciably above the minimum employment a decline below which would endanger life.
