CB:> I guess this means some data came or was reinterpreted to contradict > the Phillips Curve data and interpretation, but I can see why Friedman > wouldn't like the Phillips Curve: Wages up correlated with unemployment down > would imply just keep raising wages and soon full employment would be > reached, no ? The workers' dream and the capitalists' nightmare. This puts > capitalist economists' focus on stopping inflation in a different light.
I don't think that it. The Phillips Curve is about _money_ wages (W) going up when unemployment is down. (Money wages are what's printed on your paycheck.) This is not quite the workers' dream, since when money wages go up, the capitalists usually raise prices (P). High demand giveth high money wages to workers but then taketh way by raising prices. Thus real wages (W/P) may stay the same, fall, or rise. (Real wages are what goods and services your wages are able to buy.) (There's a related concept called the "wage curve" (Blanchflower and Oswald). In line with Marx, rising unemployment implies falling real wages, and vice-versa, all else constant. However, it doesn't work very well at the macroeconomic level.) Also, the Phillips Curve causation doesn't go as you suggest. It's not that high wages mean high demand meaning low unemployment. It's much more a matter of high demand for goods and services (GDP) causing a high demand for labor (low unemployment) causing faster growth of money wages (and prices). (Some see high inflation as causing low unemployment, reversing this causation. In the end, the PC is more of an empirical generalization than a theory.) Friedman was opposes to the PC because he didn't like the idea of the government choosing a low unemployment rate, balancing the benefits of this situaiton against the costs (inflation). Instead, he wanted the gummint out of the economy (except to preserve property, profits, etc.) In his view, the unemployment rate was determined by Nature (the "Natural" rate of unemployment). If the gummint messes with Mother Nature, there's Hell to pay in his view. The natural rate of unemployment is in some ways similar to Marx's idea of the reserve army of the unemployed. Marx saw capitalism as requiring some minimum amount of unemployment to prosper (though Kalecki pointed out that this wasn't necessary under fascism; some argue that social democracy can lower this, too). For Friedman, capitalism is natural, so it's Nature that requires a minimum amount of unemployment. > Higher workers' wages doesn't necessarily mean higher prices, if profits are > cut. .... Profits would be cut through price controls ( without wage > controls) in the US, price controls have always been associated with wage controls, with emphasis on the latter. If profits are cut, the capitalists would go ape-shit. > "Into the 1970s however, many countries experienced high levels of both > inflation and unemployment also known as stagflation." > > Was this inflation higher wages or mainly higher prices ( or both ?). U.S. > wages weren't going up at the time President Ford was handing out "Whip > Inflation Now" buttons were they ? in the early 1970s (and again in the later part of the Ford administration), money wages rose more than prices. But during most of the 1970s, prices rose more than money wages. > Phillips curve > From Wikipedia, the free encyclopedia I wrote a lot of the Wikipedia text. Since then, I decided that it wasn't worth it (because people come along and rewrite, sometimes messing things up totally). Because of this, instead of rewriting the entry on the "labor theory of value," for example, I'm going to write a primer on the subject and simply put a link to it in Wikipedia so that interested readers can look at it. -- Jim Devine / "There can be no real individual freedom in the presence of economic insecurity." -- Chester Bowles
