Re: Interest Rates and inflation

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

      This must be a case where Blaug dropped the
ball.  The guy is capable of errors.  In the text the
phrase "Phillips curve" is used, as well as "Phillips
schedule" and "Phillips' curve."  When they use
"Phillips curve" in connection with the unemployment
rate/inflation rate relation, they say "modification of
the Phillips curve."  I don't what Lipsey called it in
his article as I don't have that handy, but lots of people
cite the Samuelson-Solow article as the source of the
term, and it sure looks like it to me.  Certainly Samuelson's
putting it in his textbook popularized it and made it a, well,
textbook concept.
Barkley Rosser
-----Original Message-----
From: eperez <eperez@xxxxxxxxx>
To: J. Barkley Rosser, Jr. <rosserjb@xxxxxxx>
Cc: pkt@xxxxxxxxxxxxxxxx <pkt@xxxxxxxxxxxxxxxx>
Date: Friday, December 22, 2000 1:19 PM
Subject: Re: Interest Rates and inflation


Barkley,

(i) As you correctly point out S&S in their 1960 article include a
graph with the title "Modified Phillips Curve". The reference to
Samuelson's 1964 textbook can be found in Blaug (1996) "...a new
concept the Phillips Curve, so named by Samuelson when he
intriduced it into the sixth edition of his elementary text
economics". May be it´s an insignificant distinction between
modified PC and just Ph. C or maybe Blaug never read S & S
(1960).

(ii) Fisher (1926)  presented statistical evidence showing the
relevance of the relation between unemployment and inflation
between 1915-1926. His main argument was the lag between costs
and prices. Costs lag behind prices. Fisher pointed out to five
issues that should be considered when analizing the relationship
between inflation and unemployment: i) the empirical importance of
the relationship and its relevance to business cycles; ii) his micro
approach to the problem analyzing it at the firm level; iii) an
analysis based on contractual rigidities; iv) a transitory relationhip;
v) the importance of maintaining stable prices for increasing
employment.
These, in my opinion, are key issues that are clearly  set out by
Fisher and that were later brought up and analyzed by
Neoclassical economists during the Ph. Curve debate
(expectations, firm level approach, staggered wage contracts,
importance of inflation stabilization to increase employment). This
is why the reference is important relative to for example Hume.

(iii) As for the fact that many economists before the 20th century
analized the relationship between monetary and real variables.
Certainly. It´s a key topic in the history of economic thought.


From:           "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
To:             <eperez@xxxxxxxxx>
Copies to:      <pkt@xxxxxxxxxxxxxxxx>
Subject:        Re: Interest Rates and inflation
Date sent:      Thu, 21 Dec 2000 12:42:31 -0500

     LIpsey may well have beaten Samuelson and
Solow to the punch.  But, in their 1960 paper they
very definitely label it the "Phillips Curve."  See
Figure 2 which shows a downward sloping (but steep)
curve, with the vertical axis labeled "Average price
rise (percent per annum)" and the horizontal axis
"Unemployment rate (percent)".  Actually the full
label on this figure reads "Modified Phillips Curve
for the United States.  This shows the Menu of Choice
between Different Degrees of Unemployment and
Price Stability, as Roughly Estimated from the Last
Twenty-Five Years of American Data."
      But, as noted in another post, there were plenty
of people before the 20th century who made stabs
at this concept.
      Happy holidays, everybody!
Barkley Rosser
-----Original Message-----
From: eperez <eperez@xxxxxxxxx>
To: pkt@xxxxxxxxxxxxxxxx <pkt@xxxxxxxxxxxxxxxx>
Date: Thursday, December 21, 2000 10:46 AM
Subject: Re: Interest Rates and inflation


>(i)Didn´t Lipsey (1960) provide the first interpretation of the PH.
>curve showing that unemployment was a valid indicator of excess
>demand which then served Solow and Samuelson's purpose of
>using it as a "trade off" curve?. I am aware that Lipsey published in
>Feb. 1960 and S& S in May 1960.
>
>(ii) The expression "Phillips Curve" was named and introduced by
>Samuelson in his 1964 edition of Economics.
>
>(iii) Fisher (1926) provided the first analysis between inflation and
>unemployment.
>
>
>
>
>From:           "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
>To:             "Alan G. Isaac" <aisaac@xxxxxxxxxxxx>
>Copies to:      <pkt@xxxxxxxxxxxxxxxx>
>Subject:        Re: Interest Rates and inflation
>Date sent:      Wed, 20 Dec 2000 12:52:27 -0500
>Send reply to:  pkt@xxxxxxxxxxxxxxxx
>
>      It should perhaps be noted that the original
>curve that Phillips himself estimated was one
>between the rate of growth of wages and the
>unemployment rate, which he found to be a
>negative relationship.  I stand to be corrected if
>wrong, but it is my understanding that it was Samuelson
>and Solow who took his study and derived from it
>the hypothetical negative relationship between the
>inflation rate and the unemployment rate that they then
>labeled as "the Phillips Curve."
>     The original paper by Phillips is
>A.W. Phillips, "The Relation between Unemployment and
>the Rate of Change of Money Wage Rates in the United
>Kingdom, 1861-1957," Economica, November 1958,
>vol. 25, pp. 283-299.
>     The paper by Samuelson and Solow is
>Paul A. Samuelson and Robert M. Solow, "Analytical Aspects
>of Anti-Inflation Policy," American Economic Review, May 1960,
>vol. 50, pp. 177-194.
>      Again, I stand to be corrected if these are not the key
>papers and the correct sequence of the appearance of the
>"Phillips curve" in economic discourse.
>Barkley Rosser
>-----Original Message-----
>From: Alan G. Isaac <aisaac@xxxxxxxxxxxx>
>To: pkt@xxxxxxxxxxxxxxxx <pkt@xxxxxxxxxxxxxxxx>
>Date: Wednesday, December 20, 2000 11:22 AM
>Subject: Re: Interest Rates and inflation
>
>
>>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
>>
>>
>>
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>Esteban Pérez
>Economic Affairs Officer
>Economic Commission for Latin America and the Caribbean
>United Nations
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Esteban Pérez
Economic Affairs Officer
Economic Commission for Latin America and the Caribbean
United Nations
Av. Presidente Masaryk 29 12o Piso
Col. Chapultepec Morales 11570 Mexico D.F.
Phone   : 263-9681
Fax     : 531-1151
E-mail address: eperez@xxxxxxxxx
Mexico ECLAC WEBPAGE:
http://www.un.org.mx/cepal
This message does not constitute official ECLAC
correspondence; the organization is not responsible
for the contents or the consequences of its use,
not for inaccurate transmission or misdirection
----------------------------------------------------------------------------
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