Re: [Pen-l] The Natural Rate vs NAIRU

[Laurence Shute <lshute@xxxxxxxxxxxxx>]

This might help a bit:  William Vickrey, who taught at Columbia and 
received the 1996 Bank of Sweden prize in Economics, called the NAIRU 
"one of the most vicious euphemisms ever coined,"and had planned to use 
his award platform as a bully pulpit to fight against it.  Unfortunately 
he died of a heart attack two days after the award.  A good post on this 
is at:  > 
http://www.cfed.org/ideas/2007/07/in_appreciation_william_vickre.html

Larry Shute


Maxim Linchits wrote:
> 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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