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Cambridge Journal of Economics Advance Access originally published online on August 8, 2005
Cambridge Journal of Economics 2006 30(3):459-472; doi:10.1093/cje/bei066
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Work for all those who want it? Why the neoclassical labour supply curve is an inappropriate foundation for the theory of employment and unemployment

David A. Spencer*

* Leeds University Business School

Address for correspondence: Economics Division, Leeds University Business School, Keyworth Building, The University of Leeds, Leeds LS2 9JT, UK; email: das{at}lubs.leeds.ac.uk

Abstract

This paper questions the usefulness of the neoclassical labour supply curve as a factor in the theory of employment and unemployment. This curve rests on the false premise that workers can ‘choose’ whether to work or not, and gives credence to the idea that all unemployment constitutes chosen leisure. Despite this, it was used by Keynes to define the point of full employment. This contributed to the misleading impression that the level of full employment is determined by psychological factors. Challenging this view, Joan Robinson sought to integrate a wider set of issues into the theory of labour supply, in order to build a different (non-neoclassical) foundation for Keynes's theory of effective demand. Drawing upon Robinson, the paper argues against the use of the neoclassical labour supply curve within macroeconomic analysis.

Key Words: Labour supply • Involuntary unemployment • Full employment • Keynes • Joan Robinson

JEL classifications: J22, E24

Manuscript received October 29, 2004; final version received June 21, 2005.


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