Recovering Keynesian Phillips curve theory

Thomas Palley

No 26-2018, FMM Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: Economic theory is prone to hysteresis. Once an idea is adopted, it is difficult to change. In the 1970s, the economics profession abandoned the Keynesian Phillips curve and adopted Milton Friedman's natural rate of unemployment (NRU) hypothesis. The shift was facilitated by a series of lucky breaks. Despite much evidence against the NRU, and much evidence and theoretical argument supportive of the Keynesian Phillips curve, the NRU hypothesis remains ascendant. The hypothesis has had an enormous impact on macroeconomic theory and policy. 2018 is the fiftieth anniversary of Friedman's introduction of the NRU hypothesis. The anniversary offers an opportunity to challenge, rather than celebrate it.

Keywords: Natural rate of unemployment; Keynesian Phillips curve; Friedman; Tobin (search for similar items in EconPapers)
JEL-codes: E00 E12 E20 E30 E60 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018
New Economics Papers: this item is included in nep-hpe, nep-mac and nep-pke
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:fmmpap:26-2018

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