On Theories of Unemployment

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Abstract
There is a long-standing tension in economics between belief in the advantages of the market mechanism and awareness of its imperfections. Ever since Adam Smith, economists have been distinguished from lesser mortals by their understanding of and — I think one has to say — their admiration for the efficiency, anonymity, and subtlety of decentralized competitive markets as an instrument for the allocation of resources and the imputation of incomes. I think we all know this; for confirmation one can look at the results of a paper (James Kearl et al.) presented at the last annual meeting, reporting the responses of professional economists to a sort of survey of technical opinion. The propositions which generated the greatest degree of consensus were those asserting the advantages of free trade and flexible exchange rates, favoring cash transfers over those in kind, and noting the disadvantages of rent controls, interest rate ceilings, and minimum wage laws.

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