Re: Nairu and FEAPS

[Warren Mosler <mosler@xxxxxxxx>]

My position in FEAPS is that there is a nairu,
or something very similar, in the case of monopoly
wherein the monopolist sets quantity and lets the
value of his product float.

So there are two points I wish to address:

First, recognizing that the US gov will continue
to set q (via the budget)and let p float,
it is reasonable to ask "what is the nairu, does it
move, and, if so, what moves it?"
That is, given current policy, there IS a
theoretical 'nairu,' even though specific levels
may be difficult or impossible to determine.

Second,
Why chose the option to set q?  Why not chose
an option, like the elr, that sets p, like
any rational monopolist would?

Monopoly theory tells us there
is a nairu, or something similar, given the
choice we have made to set q.  We need
to set p and let q float to not have a nairu
type condition.

So I suggest we reexamine the position of denying
that some (low) level of unemployment will lead
to accelerating inflation with current policy of
letting all prices paid by govt be market determined.

Warren
--
Warren B. Mosler
Director of Economic Analysis
III Finance

See "Soft Currency Economics:"
and related documents:

http://www.gate.net/~mosler/softecon.htm