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Full Employment: The Road Not Taken

Listed author(s):
  • Pavlina R. Tcherneva

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.

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File URL: http://www.levyinstitute.org/pubs/wp_789.pdf
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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_789.

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Date of creation: Mar 2014
Handle: RePEc:lev:wrkpap:wp_789
Contact details of provider: Web page: http://www.levyinstitute.org

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  1. Eriksson, Stefan & Rooth, Dan-Olof, 2011. "Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment," IZA Discussion Papers 6235, Institute for the Study of Labor (IZA).
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