Should-Read: Richard Lipsey: The Phillips Curve and an Assumed Unique Macroeconomic Equilibrium in Historical Contex

Should-Read: Richard Lipsey: The Phillips Curve and an Assumed Unique Macroeconomic Equilibrium in Historical Context: “So we seem to have gone full circle from the early Keynesian view…

…in which there was no unique level of GDP to which the economy was inevitably drawn, through a simple Phillips curve with its implied trade-0ff, to an expectations-augmented Phillips curve (or any of its more modern equivalents) with its associated unique level of GDP, and finally back to the early Keynesian view in which policymakers had an option as to the average pressure of aggregate demand at which economic activity could be sustained. However, the modern debated about whether to aim for [the high or low range of stable unemployment rates] is not a debate about inflation versus growth, as it was in the 1950s, but between those who would risk an occasional rise of inflation above the target band as the price of getting unemployment as low as possible and those who would risk letting unemployment fall below that indicated by the lower boundary of the NAIBU  as the price of never risking an acceleration of inflation above the target rate.