Speaking of zombies....
The Phillips Curve rises from the dead and makes 11 appearances at the Federal Reserve.
Number of times it should have appeared: zero. Unless, of course, it was prefaced with "widely discredited".
But wait, isn't this the "new and improved" Phillips Curve? Well, in the same way that if you replace the head of an ax a couple of times and the handle as well you still have the same ax, sure.
That is to say, the "new and improved" Phillips Curve isn't the old one, but it is still an ax. And an ax is about as useful as the Phillips Curve would be in real world economics.
The old (and unimproved) Phillips Curve stated that there was a clear (inverse) relation between inflation and unemployment. That is, if you wanted to decrease inflation you had to pay the price with higher unemployment. Stagflation laid waste to this idea in the 1970s when both inflation and unemployment increased and Reagan laid waste to it notion in the 1980s when both inflation and unemployment decreased in the 1980s.
Keynesians thought they found a loophole when Edmund Phelps proposed that the reality of the 1970s and 1980s didn't really refute the Phillips Curve, it merely meant that the expected tradeoff was shifted to outer years. (Apparently out decades as it were.) While Phelps won a Nobel Prize in economics for this bit of hand waving reality continues to be unkind to the Phillips Curve (both new and old).
The "natural rate of unemployment", the lynch pin of latter-day Phillips Curve (Phelps Curve?) adherents, doesn't hold up any better than the old premises. In the late 1990s and for the past couple of years we have had unemployment lower than the theoretical "natural rate" of unemployment, yet inflation was not a consequence of the late 1990s nor does it appear to be a consequence today.
Indeed, a good old-fashioned energy "shock" is currently the leading contender for a cause of inflation.
Reality will always win out...it is disquieting to find that the current Gnome in Chief at the Federal Reserve isn't a fan of it.
Number of times it should have appeared: zero. Unless, of course, it was prefaced with "widely discredited".
But wait, isn't this the "new and improved" Phillips Curve? Well, in the same way that if you replace the head of an ax a couple of times and the handle as well you still have the same ax, sure.
That is to say, the "new and improved" Phillips Curve isn't the old one, but it is still an ax. And an ax is about as useful as the Phillips Curve would be in real world economics.
The old (and unimproved) Phillips Curve stated that there was a clear (inverse) relation between inflation and unemployment. That is, if you wanted to decrease inflation you had to pay the price with higher unemployment. Stagflation laid waste to this idea in the 1970s when both inflation and unemployment increased and Reagan laid waste to it notion in the 1980s when both inflation and unemployment decreased in the 1980s.
Keynesians thought they found a loophole when Edmund Phelps proposed that the reality of the 1970s and 1980s didn't really refute the Phillips Curve, it merely meant that the expected tradeoff was shifted to outer years. (Apparently out decades as it were.) While Phelps won a Nobel Prize in economics for this bit of hand waving reality continues to be unkind to the Phillips Curve (both new and old).
The "natural rate of unemployment", the lynch pin of latter-day Phillips Curve (Phelps Curve?) adherents, doesn't hold up any better than the old premises. In the late 1990s and for the past couple of years we have had unemployment lower than the theoretical "natural rate" of unemployment, yet inflation was not a consequence of the late 1990s nor does it appear to be a consequence today.
Indeed, a good old-fashioned energy "shock" is currently the leading contender for a cause of inflation.
Reality will always win out...it is disquieting to find that the current Gnome in Chief at the Federal Reserve isn't a fan of it.