ABSTRACT
A central belief in conventional economics is that in capitalist systems, provided workers are prepared to accept the market wage, all who want to work will find employment, so that unemployment is essentially voluntary. Underlying this belief is the most resilient notion in economics: with given techniques, if employment is to increase, real wages have to fall. This contention rests primarily on the theory of the diminishing marginal productivity of labour, which states that as the employment of labour increases relative to capital, labour productivity will decline. If, then, firms are to expand output and employment and maintain profitability, wages will need to fall in line with declining productivity. Economists have also traditionally believed that full employment is guaranteed from the demand side by the working of ‘Say’s Law’: supply creates its own demand.
