testimony
Phelps: the natural rate, forty years on (2006) From Edmund Phelps's 2006 Nobel lecture. Looking back on the 1960s natural-rate work and on the postwar macroeconomic settlement that natural-rate thinking helped produce. A retrospective testimony — written four decades after the original 1967 papers, with the empirical record of stagflation, the Volcker disinflation, and the Great Moderation in view.
Forty years on the natural rate.
Around 1967, Friedman and I, working independently and very differently, advanced the seemingly absurd notion that there is no permanent, exploitable relation between unemployment and inflation: For any given expectation of inflation, lower unemployment requires more inflation. Higher unemployment goes with lower inflation. But over time, expected inflation catches up with actual inflation, leaving the equilibrium rate of unemployment unchanged.
Phelps’s 2006 Nobel lecture revisits the natural-rate work of 1967 from the vantage of the postwar macroeconomic settlement that work helped produce. The argument is presented as having been “seemingly absurd” at the time of writing — the postwar Phillips-Curve consensus treated a stable trade-off as the working assumption of demand-management policy — and as having been substantiated by the stagflation episode that arrived within a few years. The retrospective vantage marks this Testimony with the oxblood accent: written looking back on the 1968 AEA Moment rather than from inside it.
Edmund Phelps , 2006. Edmund S. Phelps, 'Macroeconomics for a Modern Economy,' Nobel Memorial Lecture, December 8, 2006. . source ↗
Tradition New Classical Moment Friedman's 1968 AEA Presidential Address Speaks to What causes inflation? Last updated 2026-05-07