Unemployment can persist without intervention from "summary" of The General Theory of Employment, Interest, and Money by John Maynard Keynes
The existence of unemployment in a modern industrial system, where there is no question of the adequacy of the effective demand, is explained by the fact that movements in the marginal efficiency of capital may be large and unpredictable. Changes in the rate of interest do not exert an immediate and direct effect on the marginal efficiency of capital, and so do not lead to an immediate and direct effect on the volume of employment. Thus, the idea that the level of employment is uniquely determined by the level of effective demand is not entirely accurate. The marginal efficiency of capital plays a crucial role in determining the level of employment in an economy, and fluctuations in this variable can lead to persistent unemployment even in the presence of sufficient demand. In this framework, the level of employment is not a fixed point determined solely by the level of effective demand. Instead, it is subject to fluctuations driven by changes in the marginal efficiency of capital. These fluctuations can lead to persistent unemployment if left unchecked. Therefore, it is crucial for policymakers to intervene in the economy to address these fluctuations and prevent the persistence of unemployment. Without such intervention, unemployment can persist indefinitely, leading to significant social and economic costs.- The concept that unemployment can persist without intervention highlights the complex interactions between the marginal efficiency of capital, the rate of interest, and the level of effective demand in determining the level of employment in an economy. Policymakers must be vigilant in addressing these factors to ensure full employment and economic stability.
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