Monday, October 09, 2006

Edmund Phelps Won Nobel Price in Economics

So Edmund Phelps won the Nobel Price in Economics. He was not one of the most deserving candidates in my view, but they could have done a lot worse. Indeed, among those with a realistic chance of winning he was one of the better.

His main theory was that inflation will lower unemployment only if it is unexpected. If workers on the other hand expect prices to rise faster they will demand higher nominal wage increases, meaning that the infusion of new money will not lower real wages (and therefore unemployment), only raise price inflation.

Although Phelps describes it in a non-Austrian way, the basic theory is not anything that Austrians would object to.


Post a Comment

<< Home