II.

Classical Economics

The classical economists assumed that full employment was the normal state of affairs, towards which the economy naturally gravitated. Changes in taste or technology, or the opening up of markets at home or abroad, might mean that jobs were lost in some industries, but would also mean that new jobs were created in others. Any unemployment that emerged would be temporary, soon being eliminated by the operation of market forces, and in particular by the flexibility of wages. If people stayed unemployed, this could only be because they were demanding excessive wages. At a lower wage they would be bound to find a job. In this sense, unemployment was “voluntary”.