Monday, August 4, 2014

Two more points on the Phillips Curve discussion

I know this Magness guy is really not worth the time investment, but before I leave this behind I wanted to share this great passage from Samuelson-Solow on the difficulty of pinning down microfoundations (which, as you'll recall from the last post, is the point of the paper - to discuss competing microfoundational explanations of the Phillips Curve floating around in the 50s). From page 191:

"We have concluded that it is not possible on the basis of a priori reasoning to reject either the demand-pull or cost-push hypothesis, or the variants of the latter such as demand-shift. We have also argued that the empirical identifications needed to distinguish between these hypotheses may be quite impossible from the experience of macrodata that is available to us; and that, while use of microdata might throw additional light on the problem, even here identification is fraught with difficulties and ambiguities."

They go on to talk about a hypothetical natural experiment (they don't use that term obviously) and how it could potentially sort things out.

This is, of course, the Lucas critique. It just took Lucas to really make it stick.

The second point I want to make is that when you're talking about history of thought you really need to distinguish between what contribution (say) Friedman actually made to the discussion and what contribution Friedman said he made (or even what contribution the textbook or the Nobel prize committee said he made... because you don't do intellectual history by polling practitioners). It's trivial to find Friedman saying those crazy Keynesians didn't realize the Phillips Curve isn't stable. If the question is "how did Friedman describe his own research program" that has a different answer from the question of "how did Friedman fit into the history of the Phillips Curve".

1 comment:

  1. I like that second point. It strikes me as an important point to think about when also evaluating people's references to things like Hayek's statement that there shouldn't be a Nobel Prize, or Solow's more recent screeds against modern macro. Scholars attempting to evaluate the legacy of their own work, even retrospectively, no matter how great they might be, shouldn't be taken at face value.

    Good to see you back + blogging, Daniel.


All anonymous comments will be deleted. Consistent pseudonyms are fine.