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The chapter examines the core framework of A. C. Pigou’s Theory of Unemployment (TU) with the aim of providing a rational reconstruction of his analysis of the determinants of unemployment in the short period. This is accomplished without any comparison with Keynes’s criticism of TU, as often found in the previous literature.

I reconstruct Pigou’s two-sector model, which only accounted for output in the wage good sector but not in the non-wage good sector, as a complete two-sector model to reveal his implicit assumptions about the passive behaviour of non-wage earners in the non-wage good sector. I also find classical elements, most notably the wage fund doctrine and the hypothesis on profits, in Pigou’s approach, which partly explains why the model is incomplete when viewed in terms of its neoclassical elements. In the “A Rational Reconstruction of the Two-Sector Model” section, I sketch a mathematical model to make Pigou’s analysis consistent.

The chapter shows how unemployment is determined and how economic policy to deal with it is conceived in the work of a major exponent of the pre-Keynesian approach.

This article provides a detailed investigation of how Lewis revisited classical and Marxian concepts such as productive/unproductive labor, economic surplus, subsistence wages, reserve army, and capital accumulation in his investigation of economic development. The Lewis 1954 development model is compared to other models advanced at the time by Harrod, Domar, Swan, Kaldor, Solow, von Neumann, Nurkse, Rosenstein-Rodan, Myint, and others. Lewis applied the notion of economic duality to open and closed economies.

The author examines the argument elaborated by Pigou in his Employment and Equilibrium. A Theoretical Discussion which was the first comprehensive answer Pigou gave to the analysis put forward by Keynes in his General Theory. The chapter consists of seven sections. In the first, the motivation of the chapter is outlined. In the second, third, and fourth sections, the author will concentrate on how Pigou elucidates the conditions necessary for an economic system to attain a short period flow equilibrium. In this context, the author elaborates an “open” macro model which can be “closed” in two different ways. The chapter will also present a diagrammatic analysis of Pigou’s theory in the two cases elucidating the structure and the working of the model. Differences with the author’s previous book (TU) related to (real/monetary) wage inflexibility and the importance of monetary factors are also described and discussed. Pigou however does not limit himself to deal with the short period but engages in an interesting discussion of the long period centered on the notion of stationary state that is the object of section five. In this way, he admits that Keynes’s theory is not limited, to the short run. In arguing along these lines, he comes close to describe what will be recognized later as the Pigou effect. A short comparison with the renewed stagnationist theory is sketched. The sixth section includes a brief discussion of the comparative statics and dynamic analyzes elaborated by Pigou. A final section including a few conclusions completes the chapter.

“Economics is a Serious Subject.” Edwin Cannan.

In his bestselling The Worldly Philosophers, Robert Heilbroner puts the focus on the visions and analyses of the great economic thinkers from Adam Smith to Joseph A. Schumpeter. Worldly philosophy is considered as a child of capitalism and worldly philosophers as system-builders addressing the long-run development of the economy and the society. This implies viewing the economy as historically and institutionally situated demanding a more interdisciplinary perspective and embedding economics in the social sciences. The article compares the work of Heilbroner and Adolph Lowe who was Heilbroner’s main mentor. The focus is on their reflections on Smith and Schumpeter. Heilbroner considered Smith as the first worldly philosopher of whose Wealth of Nations a German translation was published already in 1776 in Stuttgart, Lowe’s native city. Lowe’s early work on business cycles was strongly inspired by Marx and Schumpeter’s emphasis on the role of capital accumulation and technical progress as well as Schumpeter’s distinction between statics and dynamics. Lowe was forced to emigrate from Nazi Germany in spring 1933, only half a year after Schumpeter’s move to Harvard where Heilbroner studied in the late 1930s when Schumpeter enjoyed making provocative statements on the Great Depression which was still not yet overcome.