Labor Discipline and Imperfect Competition

Abstract

The interaction between product and labor markets was one of the main themes of Keynes's The General Theory. However, Keynes's careless adoption of the first postulate of the classical economics caused great confusion. In particular, the perfect competition implied by the first postulate is inconsistent with the Keynes’s macroeconomics. This paper presents the model that incorporates imperfect competition in product and labor markets into one and discusses the relationship between the wage rate and the employment level.