“Political Aspects Of Full Employment” Revisited

A Formal Model Of Reactionary Macroeconomic Policy In Recessions and What To Do About It

Abstract

Using an imperfectly competitive labor market model, this paper presents a pedagogical model to illustrate the scenario reviewed in Michał Kalecki's “Political Aspects of Full Employment.” A strict distinction is made between
the model presented by Kalecki and those models presenting his idea as a collective social planning problem. The model presented in this paper demonstrates graphically why both employers and the employed have minimal
incentive to petition for full employment programs. Lastly, it is explained how historical interventions such as unions for the unemployed can provide an otherwise absent catalyst for full employment macroeconomic policies.