“Natural Rate”–What if it isn’t? — Matt Reed

Summary:
Users of Twitter know the thrill of seeing a tweet so good that you want to have it embroidered on pillows. The form lends itself to aphorisms or clever asides; Oscar Wilde and Dorothy Parker would have loved it. This week, the economist Stephanie Kelton posted a tweet for the ages: “What is the natural rate of college enrollment?” It’s slyly great. It’s a play on the “natural rate of unemployment,” a discredited concept popular in the 90’’s. The NAIRU was supposed to represent the unemployment rate an economy couldn’t go below without triggering runaway inflation. (It was based, in turn, on the “Phillips curve.”) The assumption underlying the NAIRU was that unemployment and inflation were inversely related, so if unemployment got too low, inflation would result.... Inside Higher

Topics:
Mike Norman considers the following as important: Education, MMT, Natural Rate, Stephanie Kelton

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