Wednesday, May 14, 2008

End of the phillips curve?

Unemployment up by 14,000 to 1.61 million and inflation jumps to 3% in April according to the CPI which normally underestimates the true rate of inflation.

Which would point to the Phillips curve being made null and void by an incompetent government.

Could it be that we are going back to the 1970s and stagflation? Flares are making a comeback after all...


Tim Worstall said...

Not null and void, no, shifted. What moves the curve itself (rather than movements along the curve) is the structure of the society. Most especially, the welfare state, the marginal tax and benefit rates people face coming off that and the fleixibility of the labour market itself.
As you know, Gordo's screwed up all three of those, so he's shifted the curve to higher inflation and higher unemployment as the stable state.

Trixy said...

And yet he's saying to the papers that he can save the economy! Doesn't he realise he screwed it up in the first place. It's like a kid going near a vase he broke which is being mended with super glue.