Do governments have to ensure full employment?

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Do governments have to ensure full employment?

It is obvious that nowadays economic interventionism, through various policies, is a key concept in every countries. Economic policies are dividedinto 2 types: industrial (structural) and stabilization policies. The former has effects on the long term economical effects by stimulating specific activities to promote structural change, while theformer aim at stabilize the economy in the short term. Stabilization policies can be fiscal or monetary. The second are lead by independent institutions such as the Federal Reserve or the EuropeanCentral Bank and mainly aim at ensure price stability, an equilibrate balance trade and last but not least, full employment. Full employment can be defined as the economical situation where the entireusable factors of production are used. For the classics, full employment is a natural and easy to reach situation, while Keynesians believe that full employment is difficult to reach, especially whenthere is no state intervention. This divergence makes us think about the active pursuit of national full employment through interventionist government policies. Do governments should ensurefull-employment through interventionism? This paper aims at analyzing the pros and cons of state interventionism to attain full-employment.

Classical oriented economists consider that a flexible and acompetitive market would necessarily lead to full-employment. Classical believe that in such markets, economic agents are rational and do not suffer from money illusion (tendency of people to think ofcurrency in nominal rather than real terms). Thus, according to this economic rationality and Say’s law ("products are paid for with products"), all the money stock would be devoted to transaction andinvestment. Producers are then certain of their opportunities, set the appropriate real wage and then have a positive profit. It then set the classical virtuous circle in motion: the equilibrium on the...