John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936. In it, he advocated for dirigistic inflationary policies to stimulate the economy and aid economic recovery. Idle resources—money, labor, capital—had to be employed; otherwise, they were being wasted.

William H Hutt provided one of the earliest rebuttals of the general theory. His book, The Theory of Idle Resources (1939), lists several valid reasons for resource unemployment:

  1. Holding back resources for future plans,
  2. A judgment call concerning risk,
  3. Higher reservation wage,
  4. Demand for larger cash balances.

There is nothing inherently wrong or inefficient about resource idleness caused due to these reasons. Governments enforcing ‘full employment’ policies is coercive; it necessarily involves overriding human choice.

References

  1. William H Hutt, The Theory of Idle Resources (1939).
  2. John Maynard Keynes, The General Theory of Employment, Interest, and Money (1936).