Wouldn't Jim's point be correct that that natural rate is given-by namture, but that evil policies, such as worker protections, can raise it even futher?
On Tue, May 02, 2006 at 05:47:00PM -0400, Doug Henwood wrote: > Jim Devine wrote: > > >CB: > But Friedman counts low unemployment as bad for his class too, > >doesn't he ? > >>Tight labor market causes, well, wages to rise, because there aren't as many > >>unemployed competing for jobs, no ? > > > >I don't know what he thinks about his class. He uses the word > >"natural," which suggests that he sees a certain amount of > >unemployment as something Nature bestows upon us. And if you mess with > >Mother Nature (getting the actual unemployment rate too low), then > >Mother Nature punishes you (with accelerating inflation). > > To be fair to Friedman, he did acknowledge that the "natural" rate > could move about, depending on the state of social affairs > <http://nobelprize.org/economics/laureates/1976/friedman-lecture.pdf>: > "The 'natural rate of unemployment', a term I introduced to parallel > Knut Wicksell's 'natural rate of interest', is not a numerical > constant but depends on 'real' as opposed to monetary factors - the > effectiveness of the labor market, the extent of competition or > monopoly, the barriers or encouragements to working in various > occupations, and so on." > > Doug -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
