Jim Craven asks:
>"more-scientific" NAIRU?
The NAIRU (non-accelerating inflation rate of unemployment) is simply a
description of a posited way in which the economy may (or may not) operate
-- as opposed to the "natural" rate, which assumes that the NAIRU is
somehow a gift from Nature (tastes & technology), in Adam Smith's "realm of
natural freedom."
>I do go through NAIRU in parallel with the-called Phillips "Trade-off" and
>then also bring in the ol "Industrial Reserve Army" of Marx to compare and
>contrast with NAIRU.
It's partly a matter of definition.
I interpret the industrial reserve army as _one theory_ of the NAIRU. The
neoclassical "natural rate" theory of the NAIRU says in essence that the
NAIRU (the threshold unemployment rate, below which the inflation rate is
posited to take off into the stratosphere if the NAIRU > U for long) is due
to frictions in "labor" markets; thus, the NAIRU corresponds to structural
(mismatch) and frictional (search and turnover) unemployment.
I think a Marxian theory would say that maybe structural and frictional
unemployment exist, but there also needs to be a reserve army ("bargaining
power" unemployment) to keep workers' wage demands from hurting profits. If
the reserve army is too small compared to what is needed by capitalists to
allow an adequate profit rate, not only can they punish us with investment
cut-backs, but with inflation (even accelerating inflation). Among other
things, this says that the NAIRU is higher than implied by theories of
frictional and structural unemployment.
(There are some limits to the usual NAIRU theory, i.e., the assumption that
inflation falls as easily as it rises. But I don't want to repeat the pen-l
discussion of last year at this point.)
I see this interpretation of the NAIRU not only as following the view of
Marx but also the recent sophisticated work concerning the "conflict
theory" of inflation, e.g., Carlin & Soskice, MACROECONOMICS AND THE WAGE
BARGAIN and Burdekin and Burkett, DISTRIBUTIONAL CONFLICT AND INFLATION.
Strangely, the latter uses the "natural rate" terminology, even though the
NAIRU is endogenous to their model.
Jim Devine [EMAIL PROTECTED] &
http://clawww.lmu.edu/Faculty/JDevine/jdevine.html
