[Pen-l] The Natural Rate vs NAIRU

["Maxim Linchits" <mlinchits@xxxxxxxxx>]

Dear Pen-lers,

I am trying to understand the similarities and difference between the
Monetarist NR and the neo-'Keynesian" NAIRU. Is there any theoretical
rationale for the *accelerating*-rate hypothesis (as opposed to the
old Phillips Curve) besides the natural rate theory? Do economists and
policy makers who still think NAIRU is a meaningful concept usually
rely on assumptions about an equilibrium wage below which workers
would refuse to work and above which employers would refuse to hire?

Also (I got this from Dean Baker's paper) does the fact that real
wages and quit rates tend to be procyclical make the natural rate
theory fanciful nonsense? In other words, doesn't the natural rate
theory imply that the sub-NR unemployment experienced during booms
must be attended by deceptively high (lower real) wages to fool
workers into working more? And that workers, once they catch on to the
fraud, will quit their jobs, driving the unemployment rate and real
wages up during recessionary periods?

Thanks very much,

Max
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