Mr. Keynes, the New Keynesians, and the Concept of Full Employment

Abstract

The debate in macroeconomics over the nature of full employment has centered on identification of the numerical value of the natural rate of unemployment. In short, at any point in time, what is the full employment unemployment rate? This necessarily has been construed as primarily an empirical task “sometimes involving the use of extremely sophisticated econometric techniques (for example, Salemi, 1991; Adams and Coe, 1990; and Salop, 1979)”but this investigation has proceeded as if there were no ambiguity about the concept of full employment itself or about the companion concept of the natural rate of unemployment.