Keynes’ microeconomics of output and labor markets

Abstract

Keynes derived his well-known macroeconomic analysis from microeconomic methods based on conceptions of market-crowding equilibrium, exchange and production mediated by money, increasing returns, and unresolved social coordination problems. While these ideas (often using different terminology) have had a vigorous development in the decades since Keynes’ General Theory, there is still a limited understanding of their centrality to macroeconomic debates. This paper outlines a market-crowding theory of industry output and labor markets that implies characteristic conclusions of Keynes, and explores a social-coordination approach to the theory of output and employment. A brief general account of the logic of social interaction equilibria provides a unifying theoretical context.