Overview

Long periods of high unemployment have dogged the United States and Western Europe since the early 1970s and most of the well-developed members of the global economy are in another such period now. Dissatisfied with the explanations put forth by the Keynesian, monetarist, New Keynesian and neoclassical schools, Edmund Phelps has constructed a new series of models that account for the phenomenon of long-term slumps in terms of structural forces. Phelps sees long swings in the unemployment rate as typically the result of movements of the equilibrium rate of unemployment, rather than of deviations around an equilibrium rate that is impervious to external shocks. His theory is based partly on the recent economics of wage settling, in particular the so-called efficiency wage mechanism, whereby firms pay workers a premium to discourage quitting or shirking. It is also based on the behaviour of interest rates through which exogenous supply or demand shocks, such as shifts in profitability, savings, productivity, or population growth rates, impact on the demand for labour. Phelps builds three small micro-macro models, each one capturing a distinct kind of asset of firms important for their hiring decisions, that collectively provide a structuralist ""story"" of how the equilibrium unemployment path is determined. In an econometric and historical section the new theory of economic activity is submitted to various empirical tests against global postwar data. The author then draws from the theory some suggestions for government policy measures that would best serve to combat structural slumps. The book should interest economists, particularly macro-economists, labour economists and open-economy specialists.

Full Product Details

9780674843738

Table of Contents

Reviews

"[This] project is one of startling ambition, and the book deserves to be widely read and discussed...[Phelps] amply demonstrates how much turns upon a correct understanding of the macroeconomic consequences of market structure. One can only hope that this first bold effort will stimulate others to follow the trail blazed here.--Michael Woodford ""Journal of Economic Literature "" Edmund Phelps's book is a substantial contribution to the analysis of swings in unemployment from one cycle to the next...[It offers] a wealth of insights into the nature of unemployment.--Mervyn King ""Financial Times "" Edmund Phelps's [book]...is likely to shake the establishment. For while much of what the Columbia University economist (now working at the Russell Sage Foundation) has to say about the 'natural' rate of unemployment has been alluded to before, his ambitious explanation of long-term joblessness may serve as a license for intervention in an area where fatalism has long been fashionable.--Peter Passell ""New York Times "" As a result [of this book], academic thinking on unemployment (which will be followed in due course by popular thinking on unemployment) may be about to undergo its third decisive shift this century...""Structural Slumps"" is addressed to professional economists. They will regard it as one of the most important books of this decade. But brave non-specialists, provided they have a grounding in the subject and are not deterred by the necessary mathematics, can learn a great deal. With luck they will include some of Keynes's practical men 'who are usually the slaves of some defunct economist'. Few economists write as lucidly as Mr Phelps; among those toiling at the theoretical frontier of the subject, he is peerless in this respect. And he is unusual in another way...he writes with a sense of purpose. Mr Phelps's theory, he lets you know, matters not for its elegance or technical ingenuity--though it has both--but for the new light it sheds on a problem that urgently demands a solution. elegance or technical ingenuity--though it has both--but for the new light it sheds on a problem that urgently demands a solution. market structure. One can only hope that this first bold effort will stimulate others to follow the trail blazed here. unemployment has been alluded to before, his ambitious explanation of long-term joblessness may serve as a license for intervention in an area where fatalism has long been fashionable. �This� project is one of startling ambition, and the book deserves to be widely read and discussed...�Phelps� amply demonstrates how much turns upon a correct understanding of the macroeconomic consequences of market structure. One can only hope that this first bold effort will stimulate others to follow the trail blazed here. -- Michael Woodford ""Journal of Economic Literature"" As a result �of this book�, academic thinking on unemployment (which will be followed in due course by popular thinking on unemployment) may be about to undergo its third decisive shift this century...""Structural Slumps"" is addressed to professional economists. They will regard it as one of the most important books of this decade. But brave non-specialists, provided they have a grounding in the subject and are not deterred by the necessary mathematics, can learn a great deal. With luck they will include some of Keynes's practical men 'who are usually the slaves of some defunct economist'. Few economists write as lucidly as Mr Phelps; among those toiling at the theoretical frontier of the subject, he is peerless in this respect. And he is unusual in another way...he writes with a sense of purpose. Mr Phelps's theory, he lets you know, matters not for its elegance or technical ingenuity--though it has both--but for the new light it sheds on a problem that urgently demands a solution. Edmund Phelps's �book�...is likely to shake the establishment. For while much of what the Columbia University economist (now working at the Russell Sage Foundation) has to say about the 'natural' rate of unemployment has been alluded to before, his ambitious explanation of long-term joblessness may serve as a license for intervention in an area where fatalism has long been fashionable. -- Peter Passell ""New York Times"""

As a result [of this book], academic thinking on unemployment (which will be followed in due course by popular thinking on unemployment) may be about to undergo its third decisive shift this century... Structural Slumps is addressed to professional economists. They will regard it as one of the most important books of this decade. But brave non-specialists, provided they have a grounding in the subject and are not deterred by the necessary mathematics, can learn a great deal. With luck they will include some of Keynes's practical men 'who are usually the slaves of some defunct economist'. Few economists write as lucidly as Mr Phelps; among those toiling at the theoretical frontier of the subject, he is peerless in this respect. And he is unusual in another way...he writes with a sense of purpose. Mr Phelps's theory, he lets you know, matters not for its elegance or technical ingenuity--though it has both--but for the new light it sheds on a problem that urgently demands a solution.

[This] project is one of startling ambition, and the book deserves to be widely read and discussed...[Phelps] amply demonstrates how much turns upon a correct understanding of the macroeconomic consequences of market structure. One can only hope that this first bold effort will stimulate others to follow the trail blazed here.--Michael Woodford Journal of Economic Literature

Author Information

Tab Content 6

Customer Reviews

Recent Reviews

Countries Available