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Hitesh Jhanji, Lovely Professional University Unit-5: Classical Theory of Employment

Unit-5: Classical Theory of Employment Notes

Contents
Objectives
Introduction
5.1 Classical Theory of Employment
5.2 Summary of Complete Classical Model
5.3 Keynes’ Criticism of Classical Theory
5.4 Summary
5.5 Keywords
5.6 Review Questions
5.7 Further Readings

Objectives

After studying this unit, students will be able to :
y Know the classical principle of Employment,
y Know the summary of full classical model,
y Criticise classical principle by Keynes.

Introduction

John Meaynard Keynes is directly hit on the element base of classical on his book The Theory of
Employment, Interest and Money (1336). He developed a new economics; it brought revolution in
economic view point and policy. General Theory was written in the background of his view point.
According to Keynes, classical was the follower of Recordso. In this specially J.S.Mil, Marshal
and Pigu are involved. Keynes did disclaimer that customary and institutional economics, which
constructed till more than one century and was fix his dominance on economic view point and
tradition till before ‘Great Depression’. Because the economics of Keynes is dependent on the criticism
of classical economics, so it is necessary to understand the above nature, it is involve in the principle
of employment.

5.1 Classical Theory of Employment

Classical principle believed that the full employment is found without Inflation in capitalist economy.
Being the flexibility in labour prices, the automatic power of economics system are able to keep continue
the situation of full employment and has ability of production on that level. So full employment is
considering a normal situation and there are some abnormal situation of deviation by that level which
was tends for their full employment.

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