Reply To: Keynsians on unused resources in a recession


Check out this book. it isnt exactly the most gripping read in the world but it explains this.

Basically, Hutt argues that, for all practical purposes there are no idle resources in the Keynesian understanding. There may be resources that are not currently used but they are not being used because their most valued use in the market it to wait for use in the future.

When the government tries to employ unused resources through spending projects, it will likely pull just as many resources from existing uses as it does from idle resources, if not more. Further, even if government projects are able to pull ALL resources for a new project from idle resources, this is interfering with the use that is most valued by the market, to wait for use in the future.

As far as labor employment, in an unhampered economy, prolonged unemployment for an able worker only happens by choice whether he values leisure over work, or holding out to find a job with more money, or other reasons. Unemployment is either caused by government interference or by personal choice.