According the book, The General Theory of the Employment, Interest and Money, Keynes argues that the level of employment is not determined by the price of labor but by the spending of money on collective demand. Also, he argues that it is wrong to assume competitive market will deliver full employment. Likewise, it is wrong to believe that full employment is natural, the self-correcting and equilibrium state of a monetary economy. In contrast, under employment and under-investment are natural states to be seen unless active measures are taken. Also, he argued that the lack of competition is not the fundamental problem and measures to reduce unemployment by cutting wages but ultimately futile. He points out that there is no self-correction property in the market system to keep capitalism going. A badly depressed economy could remain in stagnation unless some alternative of capital spending is found to revive it again. The only source of stimulation is the government. Therefore, the government...
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...ment. It is wisely and morally advisable that the government has moral obligation to stimulate an ailing economy from causing further damages. In addition, it is the best approach to deal with an ailing economy on time rather to wait the market to fix itself. The government has to have a defined role in the intervention of the market such as to spend money in time of crisis and take off its hands when the economy is doing well.
John Maynard (1936). The General Theory of Employment, Interest and Money.
Friedrich Hayek (1994). The Road to Serfdom.
The Road to Serfdom. Wikipedia encyclopedia
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