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Can slowly adjusting wages explain involuntary unemployment? A critical re-examination of Patinkin's theory of involuntary unemployment

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  • Michel De Vroey

Abstract

In this paper I evaluate the logical consistency of Patinkin's claim that involuntary unemployment can result from slow speed of adjustment. I argue that Patinkin's argument is flawed because of an unjustified breach of continuity in the trade technology assumption between the microeconomic and the macroeconomic parts of Money, Interest, and Prices. Finally, I claim that the issue of flexibility versus rigidity should be linked to the trade technology assumption. As soon as a centralized trade technology is assumed, flexibility automatically comes in.

Suggested Citation

  • Michel De Vroey, 2002. "Can slowly adjusting wages explain involuntary unemployment? A critical re-examination of Patinkin's theory of involuntary unemployment," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(2), pages 293-307.
    • Handle: RePEc:taf:eujhet:v:9:y:2002:i:2:p:293-307
    DOI: 10.1080/09672560210130729
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    1. D. Calvin Gogerty & Gordon C. Winston, 1964. "Patinkin, Perfect Competition, and Unemployment Disequilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(2), pages 121-126.
    2. Barro, Robert J & Grossman, Herschel I, 1971. "A General Disequilibrium Model of Income and Employment," American Economic Review, American Economic Association, vol. 61(1), pages 82-93, March.
    3. Goulven Rubin, 2002. "From equilibrium to disequilibrium: the genesis of Don Patinkin's interpretation of the Keynesian theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(2), pages 205-225.
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    Cited by:

    1. Antonella Rancan, 2017. "The wage–employment relationship in Modigliani's 1944 article," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 24(1), pages 143-174, January.

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