Season 6 Episode 1 - A W "Bill" Phillips
Economics In Ten
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The Phillips Curve and the Adaptive Expectations
Friedman was keen to point out that the policies that might bring about a better trade-off, if you like, less unemployment might work in the short run. People are only enticed back to work by higher wages because they suffer from what we might call money illusion,. So they're not really better off in real terms. If everyone's wages go up, then they're not going to be better off. The Phillips curve is upright at what we call the natural rate of unemployment. But if you try and push the economy beyond that sort of level of unemployment, it will just cause inflation. For neoclassical economists, that's all about privatisation, weakening trade union power,
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