Keynesian Aggregate Supply, the Role of Incomes Policies and the Approach to Full Employment

Abstract

The paper argues that there is scope for aggregate demand expansion, accompanied by appropriate investments in employment, to reduce the national unemployment rate below current levels. A great obstacle to this is the priority given to inflation containment and, given the accompanying neoclassical macroeconomic framework, to a stance of aggregate demand restraint. Focus on a Keynesian formulation of aggregate supply brings incomes policies to the fore to deal with inflation and gives aggregate demand expansion the opportunity to promote full employment.