The Royal Swedish Academy of Sciences has awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2006 to Edmund Phelps, “for his analysis of intertemporal tradeoffs in macroeconomic policy." Specifically,
Phelps formulated the hypothesis of the expectations-augmented Phillips curve, according to which inflation depends on both unemployment and inflation expectations.
As a consequence, the long-run rate of unemployment is not affected by inflation but only determined by the functioning of the labor market. . . . Phelps showed how the possibilities of stabilization policy in the future depend on today’s policy decisions: low inflation today leads to expectations of low inflation also in the future, thereby facilitating future policy making.
Thereby making capital investments more attractive and boosting the rate of economic growth -- which is what I established in "The Anti-Phillips Curve." Where's my $1.3 million (the approximate dollar value of this year's prize)?
