In neoclassical economics, market systems tend to utilize all resources fully,
including labour. Perfectly flexible ages, prices, and interest rates constitute the self
adjusting mechanism that will tend to eliminate unemployed resources in the long run. In
the neoclassical version of Say’s Law, if there is unemployment wages will adjust to
increase labour demand, and interest rates will adjust to ensure that the excess of
aggregate income over aggregate consumption at the full employment level of output will
be invested. There is no involuntary unemployment in the long run, unless there are
market imperfections such as ‘sticky’ wages, government interference, or other
institutional rigidities (e.g., unions). For neoclassical economics, if there is
unemployment, government should stay out and let the market correct itself; if there are
market imperfections, government may promote conditions under which the self
adjusting mechanism works most smoothly, e.g., deregulation, anti-trust, etc.