Economic Concept
What most neoclassical economists mean by "full" employment is a rate somewhat less than 100% employment, considering slightly lower levels desirable. Others, such as James Tobin, vehemently disagree, considering full employment as 0% unemployment.
Rates of unemployment substantially above 0% have also been attacked by John Maynard Keynes:
- "The Conservative belief that there is some law of nature which prevents men from being employed, that it is 'rash' to employ men, and that it is financially 'sound' to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable - the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years. The objections which are raised are mostly not the objections of experience or of practical men. They are based on highly abstract theories – venerable, academic inventions, half misunderstood by those who are applying them today, and based on assumptions which are contrary to the facts…Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense."
- – J.M. Keynes in a pamphlet to support Lloyd George in the 1929 election.
The 20th century British economist William Beveridge stated that an unemployment rate of 3% was full employment. Other economists have provided estimates between 2% and 13%, depending on the country, time period, and the various economists' political biases.
Before Milton Friedman and Edmund Phelps, Abba Lerner (Lerner 1951, Chapter 15) developed a version of the NAIRU. Unlike the current view, he saw a range of "full employment" unemployment rates. He distinguished between "high" full employment (the lowest sustainable unemployment under incomes policies) and "low" full employment (the lowest sustainable unemployment rate without these policies).
Read more about this topic: Full Employment
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