Re: Interest Rates and inflation

["Alan G. Isaac" <aisaac@xxxxxxxxxxxx>]

On Tue, 19 Dec 2000, John O'Donnell wrote:
> Try http://www.netlabs.net/hp/marty/econ01.html or

Tendentious crankery.
But it highlights a misunderstanding:
I thought you meant ``standard'' in the profession.
(E.g., among people who actually estimate the
things.) You had some intro econ notions in mind.

> http://econ161.berkeley.edu/multimedia/PCurve1.html or any
> other of the many on line descriptions.

DeLong is intentionally simplifying on the page you cite,
which is an intro to the topic in an intro to econ class.
See his subsequent page
  http://econ161.berkeley.edu/multimedia/PCurve2.html
for a standard qualification.
But even this does not address the empirical relationship
expected in the data, of which the standard characterization
is just as I stated it. Again, see the symposium I cited.

> A "recent symposium" is not specific enough to find your
> reference.

Journal of Economic Perspectives, Winter 1997.
There is also a more recent issue of the Journal
of Monetary Economics focused on the Phillips
curve, but it is not as helpful.

> Same problem, but in any case calling such a change in
> variables a "Phillips curve" is intellectual dishonesty. If
> such a relationship is purported it is somebody else's
> contribution to the cacophony of falsehoods, not Phillips's.

Have you actually read Phillips's article?
If so, you shouldn't like either of the
links you reference above.
And as a matter of usage, it is my view that
attacking an intro textbook formulation and
pretending one is attacking the econ profession
is quite inappropriate.
The Phillips curve is whatever the profession says
it is, even if it were not Phillips's curve.
But it is: Phillips allowed that the curve could be
shifted by many variables, as did Samuelson and Solow
who named it.

I suspect your core objection derives from a misunderstanding:
you seem to think that believers in the Phillips curve are
asserting that inflation is unrelated to money growth.
But no one holds that the Phillips curve suffices to describe
the macro economy. With few exceptions, all economists accept that
you will never see large*, sustained* increases in prices in the
absence of large sustained increases in money.  For one thing, the
crude cross-country data are just far too persuasive that we
never have seen such a thing.  Quite the opposite.  Of course
most PKs will treat the money growth as endogenous to the
inflation process (usually in a *given* institutional setting).
But that is an entirely different discussion.

Alan Isaac