C'mon-I want to say... I mean whether or not you think the Phillips Curve is confusing or not it's hard to say that SW hasn't sown much confusion of his own. He wonders why anyone still uses the Phillips Curve as his friends in Chicago and Minnesota got rid of it back in the 80s:
"One of the more puzzling aspects of New Keynesian economics is the enthusiasm for bringing the Phillips curve back into the mainstream. After the 1970s, the Phillips curve had a low profile in academic work, but has had a resurgence since the 1990s in the form of the "New Keynesian Phillips curve." If you know how the discourse has evolved in central banks over time, you'll also know that, whatever was going on in the economics journals, central bankers never lost their affection for the Phillips curve. That's part of what makes New Keynesian economics attractive for them."
http://newmonetarism.blogspot.com/2013/12/phillips-curves-and-fisher-relations.html
If Mr. Williamson is puzzled by this he has a clue-according to this own story central bankers 'never lost their affection for the Phillips curve.' Maybe we should ask us why this is as all this sterling academic work in Chicago and Minnesota gave it a low profile for awhile. The obvious hypothesis to start from is that CBers stayed with it and theorists-NKers-came back to it as it can nevertheless explain things that no alternative theory has had anywhere near the success of. SW himself seems partial to something he likes to call the 'modern search theory.'
"Further, in the long run, inflation should have little or no effect on unemployment (Milton Friedman argued for no effect). The modern search theory of unemployment seems to tell us that higher long-run inflation is associated with higher long-run unemployment. "
Of course this is the story the New Classicals had wanted to tell-what it implicitly suggests is that inflation somehow brings unemployment up over time. If he claims that the PC is badly supported by the data, however, I don't think the idea that inflation causes unemployment is at all well supported by any data. Just what the social and economic impact of inflation is remains unclear. Part of it, is that you have to distinguish different types of inflation-one way is with the AS/AD model: supply or demand side. Hyperinflation is a very different animal then just modest inflation.
http://diaryofarepublicanhater.blogspot.com/2013/11/randy-wrey-on-inflation-expectations-as.html
Hyperinflation is not actually the effect of wild-eyed money printing as a Sumner would claim but rather deep political stability.
http://diaryofarepublicanhater.blogspot.com/2013/08/hyperinflation-sumner-vs-yglesias.html
As to SW himself, I've suggested in the past he's a bit of an enigma. I actually am beginning to think however, that a good place to start in understanding him is in things like the Fiscal Theory of the Price Level-product folks like Sims and Cochrane.
http://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane_fiscal_theory_panel_bfi.pdf
Part of what's been confusing is that SW's actual proposals-or those that might naturally follow from his results-whatever these are or how he reached them seems to be that we need an increase in public debt right now as the Fed is out of bullets. The reason I think that things like TFPL might be a good start is because in his comments he agreed that what he's talked about can be understood in these terms-though he maintained he wasn't using it here.
http://diaryofarepublicanhater.blogspot.com/2013/12/we-are-all-new-monetarists-now.html
He seems to be thinking of a similar idea that fiscal and monetary policy must be correlated. For folks like Cochrane what that usually means is that austerity is fine so long as we have tax cuts for the rich-'supply side tax cuts'-however, SW seems to be suggesting a rise in public debt-as best I can tell. However much clarity or lack thereof is in the PC-I think it was just the very bastardized version of the 70s that was taken down in the 70s as being obviously wrong and Phillips himself surely knew this-it's not easy to know what he's getting at.
"One of the more puzzling aspects of New Keynesian economics is the enthusiasm for bringing the Phillips curve back into the mainstream. After the 1970s, the Phillips curve had a low profile in academic work, but has had a resurgence since the 1990s in the form of the "New Keynesian Phillips curve." If you know how the discourse has evolved in central banks over time, you'll also know that, whatever was going on in the economics journals, central bankers never lost their affection for the Phillips curve. That's part of what makes New Keynesian economics attractive for them."
http://newmonetarism.blogspot.com/2013/12/phillips-curves-and-fisher-relations.html
If Mr. Williamson is puzzled by this he has a clue-according to this own story central bankers 'never lost their affection for the Phillips curve.' Maybe we should ask us why this is as all this sterling academic work in Chicago and Minnesota gave it a low profile for awhile. The obvious hypothesis to start from is that CBers stayed with it and theorists-NKers-came back to it as it can nevertheless explain things that no alternative theory has had anywhere near the success of. SW himself seems partial to something he likes to call the 'modern search theory.'
"Further, in the long run, inflation should have little or no effect on unemployment (Milton Friedman argued for no effect). The modern search theory of unemployment seems to tell us that higher long-run inflation is associated with higher long-run unemployment. "
Of course this is the story the New Classicals had wanted to tell-what it implicitly suggests is that inflation somehow brings unemployment up over time. If he claims that the PC is badly supported by the data, however, I don't think the idea that inflation causes unemployment is at all well supported by any data. Just what the social and economic impact of inflation is remains unclear. Part of it, is that you have to distinguish different types of inflation-one way is with the AS/AD model: supply or demand side. Hyperinflation is a very different animal then just modest inflation.
http://diaryofarepublicanhater.blogspot.com/2013/11/randy-wrey-on-inflation-expectations-as.html
Hyperinflation is not actually the effect of wild-eyed money printing as a Sumner would claim but rather deep political stability.
http://diaryofarepublicanhater.blogspot.com/2013/08/hyperinflation-sumner-vs-yglesias.html
As to SW himself, I've suggested in the past he's a bit of an enigma. I actually am beginning to think however, that a good place to start in understanding him is in things like the Fiscal Theory of the Price Level-product folks like Sims and Cochrane.
http://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane_fiscal_theory_panel_bfi.pdf
Part of what's been confusing is that SW's actual proposals-or those that might naturally follow from his results-whatever these are or how he reached them seems to be that we need an increase in public debt right now as the Fed is out of bullets. The reason I think that things like TFPL might be a good start is because in his comments he agreed that what he's talked about can be understood in these terms-though he maintained he wasn't using it here.
http://diaryofarepublicanhater.blogspot.com/2013/12/we-are-all-new-monetarists-now.html
He seems to be thinking of a similar idea that fiscal and monetary policy must be correlated. For folks like Cochrane what that usually means is that austerity is fine so long as we have tax cuts for the rich-'supply side tax cuts'-however, SW seems to be suggesting a rise in public debt-as best I can tell. However much clarity or lack thereof is in the PC-I think it was just the very bastardized version of the 70s that was taken down in the 70s as being obviously wrong and Phillips himself surely knew this-it's not easy to know what he's getting at.
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