A.W. Phillips and his curve: Stabilisation policies, inflation expectations and the ‘menu of choice’

Johannes Schwarzer ()

The European Journal of the History of Economic Thought, 2012, vol. 19, issue 6, 976-1003

Abstract: This paper investigates the interpretation of the Phillips curve by Phillips himself. It will be shown that Phillips primarily understood his curve as a disequilibrium relation to be used in his models on stabilisation policies and not necessarily as a long-run ‘menu of choice’ between inflation and unemployment, even though Phillips did not oppose and sometimes even appears to have endorsed this interpretation. Inflation expectations are discussed by Phillips as well. Contrary to Friedman, price expectations drive his system from the demand side but not from the supply side of the economy. Nonetheless, price expectations may induce dynamic instability.

Date: 2012
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DOI: 10.1080/09672567.2012.735686

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