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Source link: http://archive.mises.org/5727/2006-nobel-prize/

2006 Nobel Prize

October 9, 2006 by

Here is the announcement of the 2006 Nobel Prize in economics, which goes to Edmund Phelps. Here is more detail. It’s another case of an economist winning a prize for correcting the errors of other economists, while not still not meeting up to the high standards set by the likes of Say and Mises.

John Cochran has this to say: “Much of his work helped move the profession away from the standard Neo-Classical synthesis macro model, which was a positive, but also probably stimulated work on representative agent micro-foundation models which is not so positive.”

Randall Holcombe says: “By the criteria we’ve come to expect from the Nobel committee, I’d say he’s deserving. He’s a Friedman-style macroeconomist who explained why there wasn’t a stable long-run Phillips curve trade-off in formal mathematical terms. He looked at the effects of inflationary expectations and was one of the pioneers in the “microfoundations of macroeconomics” literature which was a precursor to the current general equilibrium macroeconomics that dominates the “top” journals.”

Sam Bostaph says: “He’s a step up from the last three years anyway.”

{ 3 comments }

Sione Vatu October 9, 2006 at 4:04 pm

This story was announced on the Australian Broadcasting News this morning. It was stated Phelps won the prize for demonstrating that in the long run government policy has no overall effect on unemployment. Incredible. Is that really it?

If that is indeed what he’s promoting, one can guess how it will be interpreted by politicians, bureaucrats, looby groups and special interest cronies everywhere. It’s an open cheque he’s written. Guess who’s paying.

Sione

Sooper Dave October 9, 2006 at 5:32 pm

From a news article:

In his research, Phelps suggested that inflation was not a cause of unemployment but argued that there was a base level of unemployment which helped keep prices steady.

The academy said the theoretical framework Phelps developed in the late 1960s helped economists understand the root of soaring prices and unemployment in the 1970s and the limitations of policies to deal with these problems.

His framework helped central banks shift their focus toward using inflation expectations to set monetary policy rather than concentrating on money supply and demand.

Manage the effect, not the cause.

Raymond Keller October 9, 2006 at 7:18 pm

Phelps clearly doesn’t understand Austrian business cycle theory. But any Nobel prize winning economist, who says, “..we must honor the Austrian theorists…”, can’t be all bad.

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