On Tue, May 02, 2006 at 05:47:00PM -0400, Doug Henwood wrote: > 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."
On 5/2/06, Michael Perelman <[EMAIL PROTECTED]> wrote:
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?
right. Any messing with the Invisible Hand (the "price system," the wonderful auction of the Auctioneer) raises the "natural" rate of unemployment. In addition, I'd guess that MF would agree that demographic factors could raise or lower the natural rate. But he assumed that his theory was right and then argued that the Fed should keep the money supply (or nowadays, the monetary base) growing at a constant rate. Then, _the market_ would do the rest, making the economy gravitate toward the natural rate. Meanwhile the government should get rid of worker's protections so that the world would fit better into the model. -- Jim Devine / "Economics is extremely useful as a form of employment for economists." -- John Kenneth Galbraith.
