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preserve full employment. Without this assumption ProfessorPigou ’s analysis breaks down and provides no means of determin-ing what the volume of employment will be. It is, indeed, strangethat Professor Pigou should have supposed that he could furnisha theory of unemployment which involves no reference at all tochanges in the rate of investment ( i.e. to changes in employ-ment in the non-wage-goods industries) due, not to a change inthe supply function of labour, but to changes in ( e.g .) either therate of interest or the state of confidence.

His title the “Theory of Unemployment” is, therefore,something of a misnomer. His book is not really concernedwith this subject. It is a discussion of how much employmentthere will be, given the supply function of labour, when theconditions for full employment are satisfied. The purpose ofthe concept of the elasticity of the real demand for labour in theaggregate is to show by how much full employment will rise orfall corresponding to a given shift in the supply function oflabour. Or—alternatively and perhaps better—we may regardhis book as a non-causative investigation into the functionalrelationship which determines what level of real wages willcorrespond to any given level of employment. But it is notcapable of telling us what determines the actual level of employ-ment; and on the problem of involuntary unemployment it hasno direct bearing.

If Professor Pigou were to deny the possibility of involuntaryunemployment in the sense in which I have defined it above,as, perhaps, he would, it is still difficult to see how his analysiscould be applied. For his omission to discuss what determinesthe connection between x andy, i.e. between employment in thewage-goods and non-wage-goods industries respectively, stillremains fatal.

Moreover, he agrees that within certain limits labour in factoften stipulates, not for a given real wage, but for a given money-wage. But in this case the supply function of labour is not afunction of F'(T) alone but also of the money-price of wage-goods;—with the result that the previous analysis breaks downand an additional factor has to be introduced, without there beingan additional equation to provide for this additional unknown.The pitfalls of a pseudo-mathematical method, which can makeno progress except by making everything a function of a singlevariable and assuming that all the partial differentials vanish,could not be better illustrated. For it is no good to admit lateron that there are in fact other variables, and yet to proceed