The model of competitive equilibrium which has been discussed so far is set in a timeless environment. People and companies all operate in a world in which there is no future and hence no uncertainty.

I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself?’ The answer seems obvious: Buy a very large one and just wait.

The behavior of the economy as a whole, at the aggregate, macro-level, is built up from the individual equations at the micro-level.

Once the true relationship between inflation and unemployment is understood, with luck and skill, a free lunch is possible.

But Adam Smith was a philosopher as well as well as an economist, famous in his time as much for his Theory of Moral Sentiments as for The Wealth of Nations. And as he understood so well, society is more than the sum of its individual parts.

Keynes tried to show that market economies could settle in equilibrium states in which the labour market did not clear, and in which the level of unemployment was high. He believed that this was due to a particular example of market failure, developed in his concept of effective demand.

In most Western economies, the general relationship is not in fact between the rate of inflation and the level of unemployment, but between the rate of change of inflation and the rate of change of unemployment.