Jim Devine wrote, > Saying that a phenomenon is "natural" is a much less scientific way of > describing something than doing so in simple descriptive terms (which > are more coherent or systematic).
Except that this distinction ultimately goes around in circles. Instead of attributing the mystical status directly to the rate itself, the NAIRU "description" defers its mysticism to the unexamined definitions of inflation and unemployment. Whatever the common sense notions of those two categories may be, their measurement is profoundly subject to manipulation by policy. For example, policy can count as employed someone who has worked one hour in the last week or can change the eligibility requirements for unemployment benefits and sickness benefits, thus redefining people out of the labour force. Hypothetically, one could design various procrustean policy regimes that would generate roughly just about whatever NAIRU one wished to designate as _the_ NAIRU, which takes us back to Looking Glass world where words mean precisely what Humpty-Dumpty wants them to mean. The reductio ad absurdum limit cases might be thought of as, on the one hand, a subsistence economy where there is no unemployment because there is no employment and there is no inflation because there are no prices. NAIRU would be zero. At the other extreme, if we define as "unemployment" all hours spent not engaged at designated workplaces in direct production of a set of standardized staple goods and define as active in the labour force all individuals physically capable of performing some minimal routine operation there would be an extremely high "NAIRU", let's say somewhere in the neighbourhood of 90. Back in the real world, the definitional play of NAIRU may be more of the order of its estimated size, which is to say "4.9, give or take 4.9". And I'm 6' 2" give or take a couple of yards. What is the "scientific" status of statements like that? At some ethereal level there may well be intuitive appeal to the "idea" of a NAIRU -- it's one of those seductive reactionary thought experiments. But NAIRU mixes together vague definitions with an _intimation_ of precise measurement for the purpose of arriving at a pre-conceived policy prescription. We already know what that prescription is -- restrain wages. Assigning a number doesn't make the prescription more scientific. In this regard, it is no different than judging figure skating at the Olympics. Tom Walker 604 255 4812
