Preface Introduction Concepts and Agenda Modern Equilibrium Theory Contrary Postulates of the Neoclassical Schools The Labor-Market Equilibrium Locus in Modern Models The Product-Market Equilibrium Locus and Partial-Equilibrium Unemployment Determination Capital-Market Equilibrium, Neoclassical and Modern, and General-Equilibrium Employment Key Factors in the Structuralist Theory of Unemployment Fluctuation The Closed Economy: Working Models A Turnover-Training Model A Customer-Market Model A Two-Sector Fixed-Investment Model Synthesis of the Single-Economy Theory Small and Large Open Economies: Working Models International Linkages through Investment in Employees International Linkages through Investment in Customers International Linkages through Investment in Fixed Capital Synthesis of the Global-Economy Theory Microtheoretic Formulations, Modern and Neoclassical Interest and Wealth in the Microeconomics of the Incentive Wage and Equilibrium Unemployment Structural Shifts and Economic Activity in Neoclassical Theory Empirical Evidence Econometric Tests of the Theory: A Postwar Cross-Country Time-Series Study A Concise Nonmonetary History of Postwar Economic Activity Concluding Notes Notes on Classicism, Etc. Economic Policies to Which the Structuralist Theory Might Lead Notes Glossary of Frequently Used Symbols Index
This book is nothing less than a complete reformulation of macroeconomic theory, presenting an alternative to both the new neoclassical and the mainstream Keynesian paradigms. Modern themes, heretofore separate developments in theory, are woven together in a sequence of models of compelling clarity and often startling implications: It is not the deviation from the Phelps-Friedman natural rate that is high, but the natural rate itself; contrary to the Keynesian model, welfare-state policies increase unemployment; domestic tax-and-spend policies are contractionary abroad; worldwide deficit spending call be contractionary; high marginal tax rates on labor contribute to unemployment; monetary policy plays little if any sustained role in explaining high real interest rates and high unemployment. These controversial conclusions are supported by empirical tests. -- Pentti Kouri For more than twenty years, Edmund Phelps has been making major contributions, from the workings of the natural rate to the implications of customer markets and of efficiency wages. In this hook, he puts it all together. This will 110 doubt become one of the most important hooks in macroeconomics of the decade. -- Olivier Blanchard, Massachusetts Institute of Technology Profound thinking on a profound problem. Every macroeconomist will want to consider Phelps' arguments. -- Lawrence Summers, Under Secretary for International Affairs, Department of the Treasury An important contribution to economic knowledge-not only offers a new way of understanding long slumps, but also has striking policy implications that are generally overlooked. -- Dennis J. Snower, Birkbeck College, University of London
Edmund Phelps won the 2006 Nobel Prize for Economics for deepening our understanding of the relationship between short-run and long-run effects of economic policy. He is Director of the Center on Capitalism and Society at Columbia University and author of many books, including Inflation Policy and Unemployment Theory, Structural Slumps, and Mass Flourishing.
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.
*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.
*The Economist*
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.
*Financial Times*
[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.
*Journal of Economic Literature*
For more than twenty years, Edmund Phelps has been making major
contributions, from the workings of the natural rate to the
implications of customer markets and of efficiency wages. In this
book, he puts it all together. This will no doubt become one of the
most important books in macroeconomics of the decade.
*Olivier Blanchard, Massachusetts Institute of Technology*
Profound thinking on a profound problem. Every macroeconomist will
want to consider Phelps’s arguments.
*Lawrence Summers, Under Secretary for International Affairs,
Department of the Treasury*
This book is nothing less than a complete reformulation of
macroeconomic theory, presenting an alternative to both the new
neoclassical and the mainstream Keynesian paradigms. Modern themes,
heretofore separate developments in theory, are woven together in a
sequence of models of compelling clarity and often startling
implications: It is not the deviation from the Phelps-Friedman
natural rate that is high, but the natural rate itself; contrary to
the Keynesian model, welfare-state policies increase unemployment;
domestic tax-and-spend policies are contractionary abroad;
worldwide deficit spending can be contractionary; high marginal tax
rates on labor contribute to unemployment; monetary policy plays
little if any sustained role in explaining high real interest rates
and high unemployment. These controversial conclusions are
supported by empirical tests.
*Pentti Kouri*
An important contribution to economic knowledge—not only offers a
new way of understanding long slumps, but also has striking policy
implications that are generally overlooked.
*Dennis J. Snower, Birkbeck College, University of London*
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