[OPE] The rising NAIRU

Broadly I agree with Allin on this. The concept of the Friedman/Phelps
"natural rate of unemployment" was promulgated after the stable inverse
relationship between inflation and unemployment postulated by the Philips
curve began to break down empirically.

Thus, a "natural (minimal) rate of unemployment" was inferred from empirical
data about market functioning, whereas the NAIRU seemed to be an implication
of the Philips curve. It is true, though, that most economists (like
Financial Times economists) mix the two up, and conventionally regard them
as identical, even although that is scientifically speaking wrong, as Allin
points out. The postulate of the NAIRU itself does not imply that the rate
will stay the same (a "natural" level), nor does it imply any particular
theoretical explanation.

In the excerpt from my article which I cited I aimed to illustrate how the
empiricism of economists who lack any serious theory of economic life causes
them to fall from one paradox into the next, when the empirical correlations
on which they based their theories change. My argument was, that underlying
this apparently "objective" empiricism is in fact an ideological
(justificatory) purpose. Because I had to stay within the word limit for a
book review, I had to truncate my argument severely, but anyway, I take it
as a credit for my own Marxian theory that it can accurately predict the
contour of bourgeois ideology five years in advance, without aping the Left
or the Right.

One aspect that I did not explicitly argue in my article is that relatively
low unemployment plus low price inflation in the US, Europe and Japan was to
some extent sustained by high unemployment and low wages elsewhere in the
world, making possible the import of cheap consumer goods, services and
materials.

The customary focus of the Keynesians (including left-Keynesians) is
national. Bob Pollin similarly is an economic nationalist. The Marxian
perspective is inter-national (internationalist), consequently employment
and unemployment in the Triad cannot be analysed and understood in
separation of the countries to which they are linked by the world market.

Jurriaan

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Received on Wed Jul 8 07:13:05 2009