The relationship between inflation and unemployment: a critique of Friedman and Phelps
Bibliographic record
Abstract
The ‘natural rate of unemployment’ was not an important part of Friedman's presidential address, although it is what the paper is remembered for. On the 50th anniversary of the paper, we argue that there is no ‘natural rate of unemployment’, and that the relation between inflation and unemployment is not the one assumed by Friedman or neoclassical theory. In Section 2 we present the conventional framework in which the Phillips curve is drawn by neoclassical economists. It emphasizes the exogenous nature of money, as well as the assumption that (a large part of) unemployment has to do with workers’ trade-off between paid work and leisure time (in a utility maximization perspective). Section 3 explains that the neoclassical framework is flawed, because money is endogenous and unemployment is not simply an outcome of workers’ choices with regard to the observed ‘equilibrium’ wage level. This section points out that inflation cannot be controlled with an interest-rate policy and that unemployment is the result of a lack of effective demand (hence it is involuntary). Section 4 provides two alternative macroeconomic analyses, one where inflation as well as unemployment are explained by the disorderly working of the banking system and another where conflict in the functional distribution of income within a monetary economy of production dominates. The conclusion offers some policy-oriented remarks as regards contemporary fiscal and monetary policies that a variety of countries have been adopting in their (largely ineffective) attempt to emerge from the crisis that erupted in 2008 at the global level – whose negative consequences still affect a relevant part of the world population.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.005 | 0.015 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.002 | 0.002 |
| Science and technology studies | 0.002 | 0.014 |
| Scholarly communication | 0.004 | 0.007 |
| Open science | 0.002 | 0.002 |
| Research integrity | 0.010 | 0.009 |
| Insufficient payload (model declined to judge) | 0.003 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".