Unemployment, Inflation, and the Job Structure

In this working paper, James K. Galbraith rejects the analytical construct within which many economists currently operate—that is, the construct in which, in the extreme, macroeconomic behavior is identical to the behavior reflected in microeconomic demand and supply curves. He rejects it on the theoretical and practical grounds that microeconomic categories (supply, demand, price, and quantities) “have little bearing on important policy questions.” The markets that have a bearing on policy either are asset markets (for which the rules are
dramatically different from those for flow markets) or are not really markets at all, but rather a set of deeply structural social relations. According to such thinking, microeconomic issues become secondary in the policy arena and macroeconomic policy tools—spending, taxes, income policies, and interest rates—take the fore.