Full Employment: The Road Not Taken
Levy Economics Institute, Working Papers Series, Paper No. 789
21 Pages Posted: 13 Mar 2014
Date Written: March 11, 2014
It is common knowledge that John Maynard Keynes advocated bold government action to deal with recessions and unemployment. What is not commonly known is that modern "Keynesian policies" bear little, if any, resemblance to the policy measures Keynes himself believed would guarantee true full employment over the long run. This paper corrects this misconception and outlines "the road not taken"; that is, the long-term program for full employment found in Keynes’s writings and elaborated on by others in works that are missing from mainstream textbooks and policy initiatives. The analysis herein focuses on why the private sector ordinarily fails to produce full employment, even during strong expansions and in the presence of strong government action. It articulates the reasons why the job of the policymaker is, not to "nudge" private firms to create jobs for all, but to do so itself directly as a matter of last resort. This paper discusses various designs of direct job creation policies that answer Keynes’s call for long-run full employment policies.
Keywords: Unemployment as a Monetary Phenomenon, Long-run Full Employment, John Maynard Keynes, Social Economy, Aggregate Demand Management
JEL Classification: : B3, E2, E6, H1, H31, J68
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