Wage-Price Rigidity: Keynes Assessment, Government

Wage-Price Rigidity
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Price-wage rigidity
The price-wage rigidity emphasizes that prices and wages are not flexible, unlike what the classical theory states, meaning that it is not possible to reach equilibrium in the markets (Ventelou, & Nowell, 2015). The classical economists explain unemployment as the result of mismatches. Keynesian economics suppose that the sticky prices and wages do adjust to the market conditions because of rigidity and government intervention is then necessary. Wages are rigid since workers will not necessarily accept lower wages that negatively affects their cost of living. The actions of trade unions mean that employers are unlikely to cut wages, while workers are more concerned with wages and not the level of employment. Producers can reduce production and lay off workers rather than cut prices as they have a monopoly. The Keynesian explanation of the price-wage rigidity highlights that there are cases of severe unemployment.
Keynes assessment wage-price rigidity and government’s involvement in the markets
I do not agree with government intervention and intervention as expressed by Keynes assessment. Keynes argued for government intervention to impr...