Posted on 10/09/2006 4:46:00 AM PDT by Alex1977
STOCKHOLM, Sweden, Oct. 9 (UPI) -- U.S. economist Edmund Phelps has been chosen to receive the 2006 Nobel Prize in economics for research on the relationship between employment and inflation.
Phelps, 73, will receive the prize, formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, and the $1.4 million prize that goes with it Dec. 10 in ceremonies in Sweden.
An announcement Monday from the Royal Swedish Academy of Sciences praised Phelps for his work, which showed in the long-run, the rate of unemployment is not affected by inflation.
"Phelps showed how the possibilities of stabilization policy in the future depend on today's policy decisions: low inflation today leads to expectations of low inflation also in the future, thereby facilitating future policy making," the academy said.
U.S. scientists also won the 2006 Nobel Prizes for medicine, physics and chemistry. The final two prizes for this year are to be announced this week with the Literature Prize announcement set for Thursday and the Nobel Peace Prize recipient to be known Friday.
What didn't -I- think of that?
< slaps head >
Now maybe he'll stop protesting at funerals!
I guess it has no effect "in the long run" because the economy stabilizes in a state of meltdown.
I wonder if Mr. Phelps has ever been to Zimbabwe?
My only guess.
In economics, they give a nobel for each one.
Absolutely, positively the worst selection ever for a Nobel Prize in economics. This guy identified an empirical correlation (negative) between unemployment and inflation over two post-War decades and from this asserted that we faced an incontrovertible tradeoff. It has been the basis of class warfare arguments and stupid, stupid, stupid policy (Humphrey-Hawkins). Supposedly, conservatives were interested only in price stability and didn't give a rat's arse about unemployment; whereas, good libs cared as much or more about unemployment and were willing to abide some inflation.
It would be difficult to exaggerate how influential Phelps' little curve was during the 1960s and 1970s, or how thoroughly refuted it was thereafter. Why? Because there is no long run tradeoff. That's a fact, both empirically (the relationship completely broke down beyond the early 1970s) and in all of the economic models developed in the past two decades.
This is a really, really, really poor choice by the Nobel Committee.
Well I guess that's better than getting the Nobel Peace Prize or Literature Prize. Typically, you have to murder people and/or express hatred for America to get one of those.
A bit more seriously, screw all the Noble Prizes. It's recipients include a rogue's gallery of freaks, including in science; the guy who pioneered lobotomies got a Nobel Prize, too.
Mr. Phelps is well deserving of this award. As well as is Milton Friedman.The Phillips Curve
In 1968 economist Milton Friedman published a paper arguing that one thing monetary policy cannot do is pick a combination of inflation and unemployment on the Phillips Curve. At about the same time Edmund Phelps also published a paper denying the existence of a long-run tradeoff between inflation and unemployment.
Friedman and Phelps also coined the adjective of "natural unemployment" which holds that unemployment eventually returns to its normal, or natural, rate regardless of the rate of inflation.
This "natural rate of unemployment" is what the Socialists use to beat everyone up about -- in their world humans MUST be perfected; and if not perfected, through no fault of the Socialist Idjits, then all people should be punished by overtaxations to PAY for the wellbeing of those "naturally unemployed".
Micro-managing the economy is what Liberals propose. Just like they propose to micro-manage YOUR life. In re Liberal Philosophies concerning micro-management? Micromanagement economic philosophies create long-term UNEMPLOYMENT, as the economy tilters out of balance -- which is when the Democrats usually say "vote for me!".
Bravo and thank you, Sweden, for your clarity in sight in awarding this presentation to Mr. Phelps.
See Wikipedia
It's always a happy day for an economist when the Nobel Memorial winner is announced. We all dream of getting the prize, with it's money and recognition.
Phelps is a figure of the old regime, before we knew monetary theory, before we understood how markets really work, and before we figured out public finance.
His work is simple, and true, but not particularly durable. It will go down as an interesting observation, but not as a major breakthrough in theory, like Samuelson or econometrics, like Friedman.
When a lightweight like this gets the prize, it encourages all of us to work harder, cause you never know when another of us will get that late night phone call.
I think you are confusing Phelps with Phillips (of Phillips curve fame). Though I am still unimpressed by this choice.
Sorry, no cigar. Friedman and Phelps were roundly criticized as lunatics when they presented this theory, and then proved it using the Phillips Curve to do so. Now, nearly 40 years later, their theories have been soundly proven CORRECT.
Phelps' little curve
Nope.
Phillips, not Phelps. Phillips curve.
Friedman and Phelps presented their views in the late 60s, and they were on the very same page regarding this economic theory.
Mr. Phelps' theory is the correct one.
When a doctor addresses healing a part of a patient's body with surgery or meds, most often there are negative side effects. For years, economists had been proposing to micro-manage "inflation/unemployment" and those policies only managed to worsen the situation. It focused so much on the "victims" that those who were not victims were being penalized through overtaxations. Businesses were having to cough up special "plans" to pay for those being laid off. Social Services were coughing up funds to pay for those not yet at work FULL time.
The Friedman/Phelps theory argued that in order to properly treat the "body economy"; one must not focus on negatives to the exclusion of the whole body. That sometimes, gall bladder stones might be treated by diet and exercise rather than surgery or meds which would cause problems elsewhere.
Natural rate of unemployment can be divided into two categories: Frictional (workers searching for the jobs that best suit their tastes and skills) and Structural (number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one).
Structural Unemployment is usually the result of Minimum Wage Laws, Unions and Collective Bargaining.
Democrats dislike the Friedman/Phelps theories of Economics, because these means they can't tittle about making election promises, then enacting economic policies which worsen an economy, by which they can (and do) blame "the other party" for their own (DEM) failures.
Phelps' theory focuses on growing an economy which builds jobs and ultimately serves to resolve unemployment issues.
You are right. By the late 1960s, Keynesians were very arrogantly proclaiming that they had "found the answer" to the problem of unemployment. There were only three economists I can think of who challenged this view: Friedman, Hayek, and Phelps. Plus, Lucas later based much of his Nobel-prize winning work on Phelps. The island model and the idea that macroeconomic parameters have no static equilibria were undoubtedly influenced by Phelps.
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