Between Pigou and Keynes: Champernowne on Employment and Expectations

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Champernowne agreed with Keynes that workers can only bargain for a money-wage, but argued that, to the extent that workers' (adaptive) price expectations lead to accelerating inflation or deflation, this will prompt central banks to change interest rates in order to bring the economy to its equilibrium ("basic") unemployment rate, with real wages equal to their anticipated values. However, that mechanism will not work if general uncertainty ("nervousness") prevails among businessmen. Like other Cambridge economists before him, Keynes (1936) put expectations at the centre of his macroeconomic framework. However, he departed from the view that unemployment was a short-run disequilibrium phenomenon associated to economic fluctuations brought about by incorrect entrepreneurial anticipations. Terms of use: Documents inKeynes preferred model, for demonstrating the role of effective demand in the determination of unemployment in equilibrium, assumed away disappointments and shifts in expectations. In that formulation, the (general) state of long-term expectations, which decides investment demand, is given and irresponsive to (individual) short-term expectations, which are always realized. Regardless of how agents react to disappointed expectations, the economy moves immediately to the point of effective demand, which may happen at less than full employment for a given

Domar, expectations, and growth stabilization

“…Like most economists at the time, Domar did not refer to workers' expectations, studied for the first time by D.G. Champernowne in the 1930s(Boianovsky 2020b). …”