Let me follow up on what Jim Devine and Blair Sandler
have said. There are already a lot of fairly establishment
economists, including an increasing number who are
somewhere right of center, who accept that "NAIRU can
change," which kind of vitiates the concept as a policy
holy grail. The current line is probably, "Yes there is a
NAIRU, but it shifts with conditions," and in an older
argument less accepted, in response to the state of past
unemployment. This is the hysteresis or persistence
argument (now, bill, let's not have a technical lecture
here on trend stationarity vs difference stationarity!).
The NRU is supposedly the rate to which the economy
will "naturally" go if it is an unregulated laissez-faire
state. According to the Friedman and his ilk that should
reflect some normal level of frictional and structural
unemployment. But, although there has been a strong
tendency to identify the two, there is nothing in theory to
show that they would necessarily be one and the same, even
if we grant their existence. They do not have to equal
each other and they can both change. So, why bother with
them? Obviously, they do become a cover for justifying the
reserve army in the hands of most economists, but their
essential emptiness is becoming increasingly apparent.
Barkley Rosser
--
Rosser Jr, John Barkley
[EMAIL PROTECTED]
