Keynesian Unemployment as Non-Walrasian Equilibria

One of the fundamental insights that we owe to the work of Clower (1965) and Leijonhufvud (1968) is that the basic difference between the economics of the classics and the economics of Keynes lies in the assumptions made about the adjustment behaviour of the two systems: ‘in the short run, the “Classical” system adjusts to changes in money expenditures by means of price-level movements; the Keynesian adjusts primarily by way of real income movements’ (Leijonhufvud, 1968, p. 51). ‘In the Keynesian macrosystem the Marshallian ranking of price- and quantity adjustments speeds is reversed … The “revolutionary” element of the General Theory can perhaps not be stated in simpler terms’ (Leijonhufvud, 1968, p. 52). These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.