Wednesday, August 14, 2019

Is There Really A Trade-Off Between Inflation And Unemployment? — Brian Romanchuk

Rather than attempt to explain what the mainly neoclassical economists are going on about, I want to step back and try to translate their debate into terms that would be understood by people who do not share the same assumptions. I am pretty sure that post-Keynesian economists have a lot to say about the topic as well, but once again, they tend to be discussing wonkish points that would elude an outsider.…

I have an engineering background, and engineering is largely the science of trade-offs. I have no strong objections to qualitative discussions, but I would argue that we need to at least know the sign of the exchange ratio between two variables in order to say that there is a trade-off between them.
Very simply, if we can have a policy that lowers both the unemployment rate and the inflation rate (or at least leaves inflation unchanged), we cannot pretend there is a meaningful "trade-off" between them.
And this is hardly theoretical: in the United States, we saw a near monotonic decrease in the unemployment rate after the Financial Crisis, yet the inflation rate has done absolutely nothing interesting....
Bond Economics
Is There Really A Trade-Off Between Inflation And Unemployment?
Brian Romanchuk


AXEC / E.K-H said...

Links on Brian Romanchuk’s ‘Is There Really A Trade-Off Between Inflation And Unemployment?’

The Bastard/NAIRU Phillips Curve is dead since the 1960s. For the proof see

For details of the big picture see cross-references Employment/Phillips Curve

Egmont Kakarot-Handtke

Matt Franko said...

“Phillips Curve is Dead since the 1960s”

That’s a laugh...

Here 2016:

“It’s a safe bet the FOMC will stick to the party line at its next meeting and continue foreseeing a rise to 2 percent as the Phillips curve kicks in and the “transitory effects” of declines in oil and import prices work their way through the system.”

Get a grip...