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The ‘Natural’ Rate, Neutrality and Monetary Inflation

In: A Critique of Neoclassical Macroeconomics

Author

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  • John Weeks

    (Middlebury College)

Abstract

Central to the neoclassical treatment of inflation is the concept of the ‘natural’ rate of unemployment, which proves to be another term for labour market equilibrium. The ‘naturalness’ of this rate derives from its characteristic of being consistent with a zero rate of change of the price level. The hypothesis that there is a rate of unemployment which does not provoke inflation is the heart of the Phillips curve relationship. This hypothesis need not be based on notional supply and demands nor on a concept of equilibrium. A quite convincing non-neoclassical argument can be made in terms of excess supply and demand in the context of a non-homogeneous labour force.

Suggested Citation

  • John Weeks, 1989. "The ‘Natural’ Rate, Neutrality and Monetary Inflation," Palgrave Macmillan Books, in: A Critique of Neoclassical Macroeconomics, chapter 15, pages 211-222, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-20296-6_15
    DOI: 10.1007/978-1-349-20296-6_15
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