Labour Supply, Employment and Unemployment in Macroeconomics: A Critical Appraisal of Orthodoxy and a Heterodox Alternative

Abstract

The paper begins with a critical evaluation of the modelling of the individual supply function of labour in orthodox economics. The varying ways in which the aggregate labour supply curve has been represented in macroeconomics texts is then outlined. A proposal for a simple representation of the aggregate labour supply curve based on economic, social and institutional realities is then provided. Finally the implications of our discussion for macroeconomic analysis are drawn.

Notes

¹The view that leisure is a ‘good’ is treated as axiomatic and is not explained as such (see below).

²Altman (2001) observes that standard neoclassical theory does not say under what circumstances the labour supply curve will slope upwards or downwards, in part because it lacks any insights into the nature and constitution of individual preferences.

³We do not rule out that there might be others.