RE: [OPE] The rising NAIRU

On Sun, 5 Jul 2009, GERALD LEVY wrote:

> Yes, Paul B. In more general terms, I think Marxians (and
> progressive social theorists) should be extremely suspicious
> of any claim about what is "natural"...

The so-called "natural" rate of unemployment is clearly specious,
but notice that the 'N' in NAIRU does not stand for "Natural":
it's the "Non-Accelerating Inflation Rate of Unemployment".

The idea is that in any given economy at any given time, there
exists a minimal rate of measured unemployment, below which
inflation will tend to accelerate. It's difficult to make this
operational -- to give an actual number -- and attempts to give a
number, or even a direction of change of the number in a given
conjuncture, may well be ideological.

All the same, the concept is not nonsensical. It's easy enough to
accept that a capitalist economy with a measured unemployment rate
of, say, 1 percent (if that were even possible) would be seriously
"overheated". This would be below the rate (it used to be
called "frictional unemployment") that represents the normal
movement of people between occupations and locations.

The "NAIRU" terminology was an explicit attempt by centrist and
leftish economists to displace Milton Friedman's notion of a
natural rate of unemployment. Of course, it may have been
hijacked since.

Allin Cottrell
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Received on Tue Jul 7 20:33:33 2009