,! 0SCI5CE0 ( CLASS W>F>E 

,PEOPLE 3 

,AU?OR 3 ,IA9 ,MC,KAY 

,TEXT 3 

,S9CE ! #a#i#gS1 CAPITALI/ ECONOMIC POLICY HAS BE5 ROOT$ 9 0FI<T+ 9FLATION10 AN EUPHEMISM = 0CRU%+ ! WORK]S40 ,?IS POLICY IS ROOT$ 9 ! NOTION ( ! 0,NON-,ACCEL]AT+ ,9FLATION ,RATE ( ,UNEMPLOYM5T0 7OR ,N,A,I,R,U7 &1 LIKE MO/ ( ! SILLY &_/OR NA/Y IDEAS 9 MOD]N ECONOMICS1 HAS ITS ROOTS 9 ! WORKS ( ! LATE & UNLAM5T$ ,MILTON ,FRI$MAN4 

,! ,N,A,I,R,U IS BAS$ ON ! IDEA ?AT !RE IS SOME RATE ( UNEMPLOYM5T BEL[ :I* 9FLATION />TS TO RISE4 ,! PROBLEM IS1 IT IS 9VISIBLE4 ,!RE IS NO WAY ( DET]M9+ :AT ?AT RATE IS BEYOND LOOK+ AT :AT ACTUALLY HAPP5S TO ! 9FLATION RATE4 ,SO ! ECONOMIC POLICY ACROSS MU* ( ! WORLD IS BAS$ ON A GR\P ( TE*NOCRATS TRY+ TO GUESS :]E AN 9VISIBLE VALUE IS &1 TO MAKE MATT]S WORSE1 ! RATE *ANGES OV] TIME4 

,?IS IS BECAUSE ! RATE IS DEP5D5T ON MANY FACTORS1 ! KEY ONES RELATE TO WORK+ CLASS P[] - I4E4 \R ABILITY TO DEM& & GA9 BETT] PAY & CONDITIONS4 ,! LOGIC IS SIMPLE4 ,AS UNEMPLOYM5T FALLS1 WORK]S FEEL MORE ABLE TO DEM& BETT] PAY & CONDITIONS1 =M UNIONS & SO ON4 ,?IS RAISES ! WAGE BILL1 :I* COMPANIES (F-SET BY RAIS+ PRICES4 ,?IS1 9 TURN1 GETS WORK]S TO DEM& HI<] WAGES & 9FLATION />TS TO ACCEL]ATE4 ,?IS WAS ! PROCESS AT WORK 9 ! #a#i#gS & WAS BROK5 BY ,?AT*]'S & ,REAGAN'S DEEP ECONOMIC CRISES BR\<T UPON BY ! APPLICATION ( ,FRI$MAN'S ,MONET>ISM NONS5SE 7?IS SILLY DOGMA WAS V]Y FA%IONABLE ) ! RI<T BACK !N BUT DID NOT SURVIVE IMPACT ) REALITY1 AS PR$ICT$ BY SU* PO/-,KEYNESIANS AS ,NI*OLAS ,KALDOR74 ,) ! /AGG]+ LEVELS ( UNEMPLOYM5T ?IS !ORY PRODUC$1 WORK]S C\LD NO LONG] (FSET PRICE 9CREASES & SO CO/S REQUIR$ = 0RECOV]Y0 W]E PASS$ ONTO ! WORK+ CLASS4 

,NE$LESS TO SAY1 ,$MUND ,PHELPS 7! ECONOMI/ :O =MULAT$ ! MOD]N V]SION ( ?IS !ORY7 WAS GIV5 ! 7NON-7,NOBEL PRIZE = ECONOMICS 9 ,OCTOB] ( #b#f4 ,UNSURPRIS+LY1 ! ,ECONOMI/ WAS COCK-A-HOOP OV] ?IS 70,A NATURAL *OICE3 ,$MUND ,PHELPS E>NS ! ECONOMICS PR(ESSION'S HI<E/ ACCOLADE01 ,OCT #a#b? #b#f74 ,! REASONS :Y BECOME CLE>4 

,ACCORD+ TO ! MAGAZ9E1 0,PHELPS WON HIS LAURELS 9 P>T = KICK+ ! FEET FROM UND] HIS 9TELLECTUAL =]UNN]S0 BY PRES5T+ A NEO-CLASSICAL EXPLANATION = ! BREAKD[N ( ! SO-CALL$ 0,PHILLIPS CURVE0 :I* PRES5T$ A /ATI/ICAL TRADE(F BETWE5 9FLATION & UNEMPLOYM5T 70UNEMPLOYM5T WAS L[ 9 ,BRITA9 :5 WAGE 9FLATION WAS HI<1 & HI< :5 9FLATION WAS L[074 ,! PROBLEM WAS ?AT ECONOMI/S 0W]E QUICK -- TOO QUICK -- TO CONCLUDE ?AT POLICYMAK]S !RE=E FAC$ A GR&1 MACROECONOMIC TRADE(F40 ,! MAGAZ9E PRES5TS IT AS FOLL[S3 

0,9 SU* A TI<T LABOR M>KET1 COMPANIES APPEASE WORK]S BY (F]+ HI<] WAGES4 ,!Y !N PASS ON ! CO/ 9 ! =M ( DE>] PRICES1 *EAT+ WORK]S ( A HI<] REAL WAGE4 ,?US POLICYMAK]S CAN 5G9E] L[] UNEMPLOYM5T ONLY ?R\< DECEPTION40 

,PHELPS 9NOVATION WAS TO >GUE ?AT 0.<E.>V5TUALLY WORK]S WILL COTTON ON1 DEM&+ /ILL HI<] WAGES TO (FSET ! RIS+ CO/ ( LIV+4 ,!Y CAN BE DUP$ = AS LONG AS 9FLATION /AYS ONE /EP AHEAD ( !IR RIS+ EXPECTATIONS ( :AT IT WILL BE40 ,?IS MEANT ?AT ! 0/ABLE TRADE(F DEPICT$ BY ! ,PHILLIPS CURVE IS ?US A DANG]\S MIRAGE0 :I* BROKE D[N 9 ! #a#i#gS ) ! RISE ( /AGFLATION 7HI< UNEMPLOYM5T & HI< 9FLATION74 ,PHELPS1 REPORTS ! ,ECONOMI/1 >GU$ ?AT !RE WAS A 0NATURAL0 RATE ( UNEMPLOYM5T1 :]E 0WORK]S' EXPECTATIONS >E FULFILL$1 PRICES TURN \T AS ANTICIPAT$1 & !Y NO LONG] SELL !IR LABOR UND] FALSE PRET5SES40 ,?IS 0EQUILIBRIUM DOES NOT1 SADLY1 IMPLY FULL EMPLOYM5T0 & SO CAPITALISM REQUIR$ 0LEAV+ SOME WORK]S MOLD]+ ON ! %ELF4 ,GIV5 ECONOMI/S' ALMO/ !OLOGICAL COMMITM5T TO ! NOTION ?AT M>KETS CLE>1 ! PRES5CE ( UNEMPLOYM5T 9 ! WORLD REQUIRES A !ODICY TO EXPLA9 IT40 ,! RELIGI\S METAPHOR DOES SEEM APPROPRIATE AS MO/ ECONOMI/S 7& ! ,ECONOMI/7 DO TREAT ! M>KET LIKE A GOD 7A !ODICY IS A SPECIFIC BRAN* ( !OLOGY & PHILOSOPHY ?AT ATTEMPTS TO RECONCILE ! EXI/5CE ( EVIL 9 ! WORLD ) ! ASSUMPTION ( A B5EVOL5T ,GOD744 

,&1 AS ) ALL GODS1 SACRIFICES >E REQUIR$ & ,PHELPS' !ORY IS ! MEANS BY :I* ?IS IS A*IEV$4 ,AS ! ,ECONOMI/ NOTES3 09 MU* ( HIS WORK HE CONT5DS ?AT UNEMPLOYM5T IS NECESS>Y TO C[ WORK]S1 5SUR+ !IR LOYALTY TO ! COMPANY & !IR DILIG5CE ON ! JOB1 AT A WAGE ! COMPANY CAN AF=D TO PAY0 7I4E41 ONE :I* W\LD 5SURE A PR(IT74 ,UNSURPRIS+LY1 ATTEMPTS TO L[] ! 0NATURAL RATE0 HAVE ALL 9VOLV$ US+ ! /ATE TO BREAK ! ECONOMIC P[] ( WORK+ CLASS PEOPLE 7ATTACK+ UNIONS1 9CREAS+ 9T]E/ RATES TO RAISE UNEMPLOYM5T 9 ORD] TO TEMPOR>ILY 0C[0 WORK]S & SO ON74 ,ALL SO ?AT PR(ITS CAN BE KEPT HI< 9 ! FACE ( ! RIS+ WAGES CAUS$ BY ! NATURAL ACTIONS ( ! M>KET6 

,YET ,PHELPS' CONCLUSIONS >E H>DLY NEW4 ,AN>*I/S & O!R SOCIALI/S HAVE BE5 >GU+ ?AT CAPITALISM HAS NO T5D5CY TO FULL EMPLOYM5T S9CE ! #a#h#dS EI!R 9 !ORY OR 9 PRACTICE4 ,!Y HAVE ALSO NOT$ H[ P]IODS ( FULL EMPLOYM5T BOL/]$ WORK]S' P[] & H>M$ PR(ITS4 ,IT IS ! FUNDAM5TAL DISCIPL9>Y ME*ANISM ( ! SY/EM 70A :IP 9 .<! BOSSES'.> H&S1 CON/ANTLY HELD OV] Y\1 SO Y\ WILL SLAVE H>D = HIM & 'BEHAVE' Y\RSELF10 TO USE ,B]KMAN'S MEMORABLE PHRASE74 ,IT IS1 9 O!R WORDS1 09H]5T 9 ! WAGE SY/EM0 & 0! FUNDAM5TAL CONDITION ( SUCCESSFUL CAPITALI/ PRODUCTION40 ,:ILE IT IS 0DANG]\S & DEGRAD+0 TO ! WORK]1 IT IS 0V]Y ADVANTAGE\S TO ! BOSS0 & SO CAPITALISM 0CAN'T EXI/ )\T IT40 7,ALEX&] ,B]KMAN1 ,:AT IS ,AN>*ISM81 P4 #b#f7 ,AS SU*1 IT IS IRONIC ,PHELPS HAS GOT A 7NON-7,NOBEL PRIZE = RE/AT+1 9 NEO-CLASSICAL J>GON1 ! MODEL ( ! LABOR M>KET LONG DISMISS$ AS NONS5SE BY NEO-CLASSICAL ECONOMI/S 7! MA9 BRAN* ( ! RELIGION74 

,9T]E/+LY1 ! BUS9ESS SECTION ( ! ,WA%+TON ,PO/ REPORT$ ,PHELPS REW>D UND] ! SURREAL HEADL9E 0,Y\ ,MI<T ,HAVE TO ,?ANK ,HIM = ,Y\R ,JOB40 ,HE1 LIKE ,FRI$MAN1 >GU$ ?AT ! /ATE HAS TO KEEP ! UNEMPLOYM5T RATE AT OR ABOVE ! 7UNKN[N & UNKN[ABLE7 0NATURAL RATE0 9 ORD] TO KEEP 9FLATION FROM ACCEL]AT+4 ,9 O!R WORDS1 Y\ HAVE TO MAKE PEOPLE UNEMPLOY$ OR FE> BE+ MADE UNEMPLOY$ 7BY RAIS+ 9T]E/ RATES & SL[+ ! ECONOMY7 = CAPITALISM TO SURVIVE4 ,GIV5 ,PHELPS' !ORY1 IT W\LD MAKE F> MORE S5SE = ! ,WA%+TON ,PO/ TO PRODUCE HEADL9ES LIKE 0,Y\ ,MI<T ,HAVE TO ,?ANK ,HIM = ,NOT ,HAV+ A ,JOB02 0,Y\ ,MI<T ,HAVE TO ,?ANK ,HIM = ,Y\R ,JOB ,9SECURITY02 0,Y\ ,MI<T ,HAVE TO ,?ANK ,HIM = ,EXPLOD+ ,9EQUALITY CAUS$ BY ,/AGNAT+ ,PAY 9 SPITE ( ,RIS+ ,PRODUCTIVITY02 OR 0,Y\ ,MI<T ,HAVE TO ,?ANK ,HIM = ! ANNUAL TRANSF] ( @s#b#c#e BILLION FROM LABOR TO CAPITAL S9CE #a#i#g#i0 7FIGURE FROM 0,! ,/ATE ( ,WORK+ ,AM]ICA #b#f_/#g074 ,BUT1 AS ) ECONOMICS1 :Y LET REALITY GET 9 ! WAY ( A SNAPPY S\ND-BITE8 

,?AT ?IS /ATE MANIPULATION IS CONSID]$ CONSI/5T ) ! 0FREE M>KET0 SAYS A LOT AB\T ! BANKRUPTCY ( ! CAPITALI/ SY/EM & ITS DEF5D]S4 ,BUT1 !N1 = DEF5D]S ( ! SY/EM /ATE 9T]V5TION ON BEHALF ( CAPITAL IS P>T ( ! NATURAL ORD]1 UNLIKE /ATE 9T]V5TION 7AT LEA/ 9 RHETORIC7 ON BEHALF ( ! WORK+ CLASS4 ,?US NEO-LIB]AL CAPITALISM IS BAS$ ON MONET>Y POLICY ?AT EXPLICITLY TRIES TO WEAK5 WORK+ CLASS RESI/ANCE BY MEANS ( UNEMPLOYM5T4 ,IF 09FLATION0 7I4E4 LABOR 9COME7 />TS TO 9CREASE1 9T]E/ RATES >E RAIS$ SO CAUS+ UNEMPLOYM5T &1 IT IS HOP$1 PUTT+ ! PLEBS BACK 9 !IR PLACE4 

,?IS WAS ! MESSAGE ( ,M]VYN ,K+1 ! GOV]NOR ( ! ,BANK ( ,5GL&1 A FEW DAYS BE=E ,PELPHS WAS GIV5 HIS PRIZE4 ,K+ W>N$ ,BRITA9'S PAY B>GA9]S TO ACCEPT WAGE RE/RA9TS OR 9T]E/ RATES W\LD 9CREASE4 ,?IS IS DESPITE DE>] 5]GY BILLS4 ,K+ /AT$ ?AT ! CURR5T SMALL 9CREASES 9 E>N+S W]E NOT 0SUFFICI5TLY RE/RA9$0 TO COMP5SATE = ! 9FLATION>Y EFFECTS ( HI<] 5]GY PRICES & UNFAVORABLE *ANGES 9 ! PRICES ( IMPORTS & EXPORTS4 0,ULTIMATELY1 BO? DEVELOPM5TS MU/ RESULT 9 L[] REAL 9COMES10 HE SAID 7! SIL5CE ON BOSSES EXPLOD+ PAY REMA9S1 AS ALWAYS1 DEAF5+74 ,9 O!R WORDS1 ! WORK+ CLASS MU/ PAY ! PRICE = CAPITALISM'S PROBLEMS4 ,H5CE ! NE$ TO 0TO KEEP \R EYE ON ! BALL & MONITOR CLOSELY ! EVOLUTION ( WAGE & CO/ PRESSURES40 ,AS A /ATEM5T ( CLASS W>1 IT IS H>D TO F9D A MORE SUCC9CT ONE4 

,( C\RSE1 ACCORD+ TO ! ET]NAL & SACR$ LAW ( 0SUPPLY & DEM&10 WAGE RISES >E TO BE EXPECT$ :5 UNEMPLOYM5T FALLS4 ,! LAWS ( ! M>KET >E ! JU/IFICATION = BOSSES' MASSIVE RISES1 AFT] ALL4 ,EQUALLY1 ACCORD+ TO ! 0SCI5CE0 ( NEO-CLASSICAL ECONOMICS1 FIRMS >E PRICE TAK]S & SO CANNOT 9FLU5CE M>KET PRICE ( !IR GOODS4 ,BUT ! REALITY ( CAPITALISM IS F> REMOV$ FROM NEO-CLASSICAL IDEOLOGY & ! /ATE IS ALWAYS AT H& TO GIVE CAPITAL A HELP+ H&4 ,YET EV5 9 ! UNREAL WORLD ( CAPITALI/ ECONOMICS1 WAGE RISES NE$ NOT CAUSE PRICE 9CREASES4 ,?IS IS BECAUSE WAGE 9CREASES CAN BE (FSET BY R$UCTIONS 9 PR(ITS4 

,H[EV]1 ?IS IS NOT AN OPTION 9 REALITY4 ,AS ,K+ NOTES1 :ILE 0WAGE PRESSURES HAVE SO F> BE5 SUBDU$1 IT IS /ILL NOT CLE> ?AT E>N+S HAVE BE5 SUFFICI5TLY RE/RA9$ TO ACCOMMODATE ! PA/ RISES 9 5]GY PRICES & ! FALL OV] ! PA/ YE> 9 ! PRICES ( \R EXPORTS RELATIVE TO \R IMPORTS )\T A SQUEEZE ON PR(ITS4 ,ULTIMATELY1 BO? DEVELOPM5TS MU/ RESULT 9 L[] REAL 9COMES40 ,SORRY1 BUT NO4 ,:Y %\LD !RE NOT BE A 0SQUEEZE ON PR(ITS08 ,>E PR(ITS SACR$8 ,:Y %\LD ! MAJORITY ACCEPT 0L[] REAL 9COMES0 SO ?AT ! FEW CAN GET SEE !IR 9COMES RISE8 ,& ,BLAIR DECL>$ ?AT ! CLASS W> WAS OV]4 ,SOMEONE %\LD TELL ,K+444 

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,*RONOLOGY 3 
,FEBRU>Y #a#a1 #bba 3 ,! 0SCI5CE0 ( CLASS W>F>E -- ,ADD$4 
,JANU>Y #g1 #bbb 3 ,! 0SCI5CE0 ( CLASS W>F>E -- ,UPDAT$4 

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