Equilibrium in the General Theory

In a neoclassical environment, the equilibrium position is determined by supply and demand forces. Within the framework of the General Theory, the equilibrium position is determined by the principle of effective demand. In a supply and demand environment, the equilibrium level of employment is one in which the expectations of the entrepreneurs and the workers are realized. In the new classical environment inhabited by self-employed artisans, all unemployment is voluntary. The intersection of J. M. Keynes’s aggregate supply and demand curves provides the state of rest for the economy. Keynes presents a world in which entrepreneurs appear to decide how many workers to employ. In a society of self-employed artisans, any distinction between the roles of entrepreneurs and workers is superfluous. In Keynes’s approach workers are employed by entrepreneurs — just as in the co-operative economy. Workers and entrepreneurs are not, however, on an equal footing as far as bringing about change is concerned.