“Chapter Two of the General Theory abolished the supply curve of labor, hence the ‘labor market’, and transferred the determination of employment to the domain of effective demand. Businesses hire when they can sell the goods that their employees make, and not otherwise. Any model with a ‘labor market’ is an anti-Keynesian model.”Just for context, James Galbraith made this comment as a criticism of New Keynesian economic models.
James Galbraith, 1 May 2014
Marc Lavoie makes the same point:
“Ironically the major aspect of the post-Keynesian view of labour markets is that such markets do not really exist. Whereas one may admit that there is a market for peanuts or for bananas, with well-behaved supply and demand curves, the same hypothesis cannot be made in the case of labour.” (Lavoie 1992: 217).Update
Lars Syll also quotes Galbraith’s comment in full below, and the comments section is worth reading too:
Lavoie, Marc. 1992. Foundations of Post-Keynesian Economic Analysis. Edward Elgar Publishing, Aldershot, UK.