Wednesday, 30 January 2013

Why not zero unemployment?

Microeconomics is about how individuals bargain with each other. There's a bigger picture, macroeconomics, which looks at things on a large scale. Thus Keynesian economics tells of how a government deficit can be used to help promote employment. What I wonder is how individuals might be able to make a difference.

Classical economics predicts that unemployment should be zero (Well there was the argument that workers expected wages which were too high, but one is suspicious of this as presumably those putting it forward were all fairly well off). Zero unemployment isn't a very realistic prediction, but one wonders... Is there some way that we as individuals could change our behaviour - moving away from the supposed microeconomic rationality - to make reality agree better with this prediction. In scientific experiments, one often has to make some effort to demonstrate what are supposedly fundamental laws. For instance, to demonstrate Newton's first law one needs to get rid of friction. Maybe one also needs to make an effort to get reality to agree with economic 'laws' - it's just a thought.

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