Friedman (1968) versus Phelps (1968) about policy-making

Sylvie Rivot ()
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Sylvie Rivot: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: The paper argues that there are significant divergences between Friedman's (1968) and Phelps' (1968) contributions regarding economic policy. The existence of a natural rate of unemployment implies for Friedman that there is simply no room for discretionary policy. But Phelps builds the case of an intertemporal tradeoff, implying that public authorities should adopt dynamic optimisation processes and seek accordingly for the optimal inflation-unemployment dynamic path. A first argument to explain these differences applies to the dynamics at work in a decentral-ised economy. Next, at the political level Friedman and Phelps show very different degree of confidence in the public authorities.

Keywords: Economic policy; Expectation; Phillips curve; Inflation; Unemployment (search for similar items in EconPapers)
Date: 2018-01
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Published in History of Economic Ideas, 2018, 26 (3), pp.93-121. ⟨10.19272/201806103005⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04014347

DOI: 10.19272/201806103005

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