Friedman's Characterization of the Natural Rate of Unemployment

K.Vela Velupillai

No 1411, ASSRU Discussion Papers from ASSRU - Algorithmic Social Science Research Unit

Abstract: Arguably, of the many pioneering classics authored by Milton Friedman, it is his Presidential Address to the American Economic Association, in December, 1967, published as The Role of Monetary Policy in the AEA, in March, 1968, that may have had the greatest impact in serious policy circles. In this paper I try to discuss its analytical foundations, largely critically, and find the claims mathematically untenable. The setting – the background – for its emergence, and the way it influenced the future course of macroeconomics is also a part of the narrative, although at a much lesser level of rigour. Friedman’s decisive role in the direction which macroeconomics took, in confused era after the demise of the Neoclassical Synthesis, is outlined, albeit with mixed feelings of intellectual sympathy.

Keywords: Natural Rate of Unemployment; Natural Rate of Interest; Equilibrium Level of Unemployment; Walrasian System of General Equilibrium Equations; Wicksell; Keynes; Irving Fisher; Phillips Curve. (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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