An outstanding book.
It was my first thought after reading James Forder’s seminal work ‘Macroeconomics and the Phillips curve myth‘. Dr. Forder breaks down a plethora of age-old fallacies written in the historiography of economics and reshapes the 20th century history of our discipline.
Personally, I am not a researcher of the Phillips curve per se. Only two chapters of this long story are most interesting for me, Friedman’s and Lucas’ Phillips curves, which are highly influential episodes of the story. I clearly remember, I was afraid to start reading the book a couple of weeks ago, because Dr. Forder promises his readers to get the facts straight. This is his very program: to read everything that belongs to the Phillips curve literature and correct all the errors we inherited from the previous decades. And this is the program Dr. Forder accomplishes.
For me personally, the most interesting part is the chapters in which the author clears up the true role of Milton Friedman‘s Nobel lecture in the distortion of the history of the Phillips curve and how Friedman came up with a brand new narrative. This was a shocking experience to realize that the commonly believed story is Friedman’s invention. In Friedman’s reading the Phillips curve was a high-ranked constituent of both theoretical economics and economic policy discussions from the early post-war years. In Friedman’s account, the Phillips curve was the most important analytical tool of Keynesian economics and Friedman places the blame on the Phillips curve (and the believers) for all the allaged mistakes of theoretical economics and economic policy. In a nutshell, it is failure of the Phillips curve that economics derailed – and Friedman’s ambition was to put economics back on the right track. His soultion was the inclusion of expectations in order to call attention to the fact that there is no stable trade-off between inflation and unemployment. On the contrary, Phillips’ contribution was only one element in the vast literature on the trade-off between inflation and employment/unemployment (and what is more, not the most important or most inspiring one) and the Phillips-curve was not widely used in Keynesian economics to argue for inflationary politics in favour of lower unemployment rates. Friedman was unable to change the game in terms of the Phillips curve because such a game had hardly existed. However, thanks to Friedman, after his reinterpretation the Phillips-curve really came to the fore: it became the common language, the common denominator through which monetary-interested authors could express their views. In this term the Friedman-Lucas transition is particularly interesting. Setting aside the famous Marshall-Walras divide, the central feature of the debate between Friedman and Lucas was the focus on the shape of the Phillips curve and whether there is a distinction between the short-run curve(s) and the long-run vertical line.
From time to time we need to face the fallacies of our thinking. Some courageous authors like James Forder are not afraid to rebuild our science from the ultimate grounds. To be perfectly honest, sometimes I feel tempted to think there is no real progress in our discipline. Oftentimes it seems as if the cornerstones of economics and the history of economic thought are established once and for all. But some ambitious books such as Forder’s Phillips curve myth can be successful in reopening our most important questions. This is the reason why Forder’s book is a must: it can teach us how reshape our knowledge through sound reasoning.
Here is a review from Kevin D. Hoover, and another one from Michel De Vroey. Both are worth reading.