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Friedman's 1968 AEA Presidential Address
Milton Friedman, *The Role of Monetary Policy*, AEA presidential address. Introduces the natural-rate hypothesis and argues there is no long-run trade-off between inflation and unemployment.
Stub entry. Testimony excerpts from the address pending.
Delivered at the AEA’s December 1967 meeting and published in the American Economic Review in March 1968, Friedman’s address marked the public introduction of the natural-rate hypothesis. The argument: any attempt to hold unemployment below its “natural rate” through monetary stimulus produces only accelerating inflation, not a permanent gain in employment. The Phillips Curve, read as a stable trade-off, would shift as expectations adjusted.
Phelps had made a related argument in 1967. Stagflation in the 1970s did not refute the address; on its terms, it confirmed it. Old Keynesian readings of the Phillips Curve as a policy menu did not survive the decade intact.