Phillips' PID system was designed to *compress* the swing of the business cycle (by analysing automatic, rules-based, counter-cyclical devices).
The "original Phillips curve paper" was published in 1954 in the EJ (and can also be found in his 1953 PhD). The Economica and later papers were empirical illustrations.
----- Original Message -----
From: "Kevin Hoover" <[log in to unmask]>
To: [log in to unmask]
Sent: Sunday, 16 November, 2014 3:44:31 AM
Subject: Re: [SHOE] MARK BLAUG AND BELIEF IN MODELS
In the exchange between Kwasnicki and Lipsey, there are three
contrasts. Professor Kwasnicki contrasts Phillips as being concerned
with the relationship of unemployment and the wage rate as opposed to
Samuelson being concerned with unemployment and the inflation (by which
he presumably means price inflation). So, one contrast is between wages
and prices and the other between levels and rates of change. And
Professor Lipsey draws a third contrast between an interest in the
curves and an interest in stabilization policy, which he characterizes
as a concern for the relation between variations in GDP and the price
level. The original Phillips curve paper concerns the unemployment rate
and the rate of wage inflation -- not as Professor Kwasnicki suggests
the wage rate, but the rate of growth of the wage rate. Samuelson and
Solow's paper also starts with Phillips's original relationship between
unemployment and the rate of wage inflation and simply translates it
into unemployment/price-inflation space using the markup relationship
between wages and prices that Professor Lipsey mentions. Thus, it is
wrong to say, as Professor Kwasnicki does, that Samuelson's [and
Solow's] curve has "nothing in common with the original Phillips work .
. ." To the contrary, it is grounded in it explicitly. (On the
relationship between Samuelson and Solow's curve and the original
Phillips curve, see my "The Genesis of Samuelson and Solow’s
Price-Inflation Phillips Curve,
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2465921>" /History
of Economics Review/, forthcoming). That Phillips was ultimately
interested in stabilization policy seems right, and fits with his other
work on dynamics. In the original Phillips curve paper the unemployment
rate is clearly treated as a measure of the state of aggregate demand,
and the assumed causation is from demand to wage-inflation. That GDP
(presumably detrended or scaled by potential GDP) could easily serve as
a measure of demand as well is consistent with Phillips's approach. But
it does leave open a question for Professor Lipsey: in his
characterization of stabilization policy was Phillips's target actually
the price level, as Professor Lipsey writes in his post, or was he
concerned with the rate of price inflation? (Naturally, if one knows
one, the other can be worked out; but they have different causal
significance for the economy.)
Kevin Hoover
On 11/15/2014 10:19 AM, Richard Lipsey wrote:
>
> I agree with the first sentence of Witold Kwasnicki’s post but beg to
> differ from the rest. Bill Phillips, with whom I worked intimately
> when writing my piece on his curve, was primarily interested in
> stabilisation policy as evidenced by his two path breaking articles on
> that issue in the Economic Journal. In them, he used a curve relating
> deviations of GDP from some “target level” to the price level – he was
> trying to escape from the then-common kinked aggregate supply curve in
> which there was either a stable price level and variable GDP and
> unemployment or variable price level and a stable GDP and unemployment
> (at the full employment level). At the suggestion of his colleague,
> Henry Phelps Brown, he investigated the relation between wages and
> unemployment as a relation that lay behind his original curve, which
> is the one in which he was really interested. In the Keynesian model
> of his time wages were intimately related to the price level by a
> markup equation and unemployment was directly related to GDP. I have
> discussed this origin of his curve in several published articles and
> so will say no more here, except to observe that it is ironic that the
> contributions in which he was really interested, the problems of
> stabilisation policy, are much less well known today than his
> wage-unemployment curve which he regarded as only a secondary
> underpinning of the relation that mattered, the one between variations
> in GDP and the price level.
>
> Richard Lipsey
>
> *From:*Societies for the History of Economics [mailto:[log in to unmask]]
> *On Behalf Of *Witold Kwasnicki
> *Sent:* November-14-14 4:13 PM
> *To:* [log in to unmask]
> *Subject:* Re: [SHOE] MARK BLAUG AND BELIEF IN MODELS
>
> The really big problem in using models by economists (especially
> government’s advisers) is that when they apply some findings flowing
> from models' analysis they forget about assumptions and
> simplifications being made during models building. The most famous
> examples in macroeconomics is IS-LM model and so called ‘Phillips
> Curve’ (having nothing common with original Phillips work, who was
> investigating relationship between unemployment and wage rate, not, as
> it is commonly presented (due to Samuelson imposition), between
> unemployment and inflation).
>
> Long story about misusing formal, mathematical approach in economic
> analysis, at least for one thick volume!
>
> Best wishes,
>
> Witold Kwasnicki
>
> ---
>
> Witold Kwasnicki, Ph.D.
> Professor of Economics
> University of Wroclaw
> Faculty of Law, Administration and Economics
> Institute of Economic Sciences
> ul. Uniwersytecka 22/26, 50-145 Wroclaw, Poland
> tel: +48 71 375 2385
> http://kwasnicki.prawo.uni.wroc.pl/
> http://kwasnicki.blog.pl/
>
> W dniu 14-11-2014 23:25, Birks, Stuart napisał(a):
>
> Uskali makes a good point.
>
>
>
> If you frame the issue in terms of theories being possible analogies, as several economists have suggested, the concern disappears. If you say, "He swims like a fish", you do not have to believe that he is a fish. The analogy is simply giving a representation and possible insight into how he swims. Similarly with theories, they may sometimes provide some insight or understanding of real world phenomena, but, as analogies, they cannot be considered as 'true' descriptions of the real world. Any belief that they are is misplaced.
>
>
>
> -----Original Message-----
>
> From: Societies for the History of Economics [mailto:[log in to unmask] <mailto:[log in to unmask]>] On Behalf Of Uskali Mäki
>
> Sent: Saturday, 15 November 2014 10:08 a.m.
>
> To:[log in to unmask] <mailto:[log in to unmask]>
>
> Subject: Re: [SHOE] MARK BLAUG AND BELIEF IN MODELS
>
>
>
> I would say one is not compelled to make a choice between use and belief, so no sharp dichotomy here. Depending on the intended or justified use of a model, and on how good the model is, one is permitted or even advised to believe some parts or aspects of the model (insofar as its relations to its target are concerned). Models are far more complex creatures than what most practicing economists or historians or methodologists of economics have been able to clearly articulate. Mark Blaug's concern is one that troubled economists of the 19th century already.
>
> c uskali mäki
>
>
>
>
>
> Lainaus Bruce Larson <[log in to unmask] <mailto:[log in to unmask]>>:
>
> Here is the Theil quote, which I always use on the first day
> of my intermediate microeconomics course: "It does require
> maturity to realize that models are to be used but not to be
> believed." Henri Theil, *Principles of Econometrics* (1971),
> p. vi Bruce Larson University of North Carolina at Asheville
> On Thu, Nov 13, 2014 at 11:21 PM, David Levy
> <[log in to unmask] <mailto:[log in to unmask]>> wrote:
>
> There is a "joke" in Henri Theil's Principles that models are
> to be used not believed. Around page 7 or so ... My copies are
> at the office but maybe I can find this on the web. I looked
> into years ago ... but let me not rely on my memory. David On
> Thu, Nov 13, 2014 at 7:08 PM, Richard Lipsey <[log in to unmask]
> <mailto:[log in to unmask]>> wrote:
>
> My late good friend, Mark Baugh, was wont to say that the
> problem with economists when they came to talk about the real
> world was the they believed their own models. I heard him say
> something like that many times but never saw it in print,
> although I suspect he did commit it to print somewhere in his
> voluminous writings. I am writing an essay that amply
> illustrates Mark's comment and would like to quote him on the
> opening page. I would be most grateful if anyone could help we
> with a reference to where Mark made that comment, or something
> similar, in print? Richard Lipsey
>
> -- David M. Levy Professor of Economics George Mason
> University Fairfax VA 22030 703-993-2319
>
>
>
> --
>
> --
>
> Uskali Mäki
>
> Academy Professor
>
> TINT Centre of Excellence in the Philosophy of the Social Sciences Department of Political and Economic Studies University of Helsinkihttp://www.helsinki.fi/tint http://www.helsinki.fi/tint/maki [log in to unmask] <mailto:[log in to unmask]>
>
--
**************************************************************
KEVIN D. HOOVER
Professor of Economics and Philosophy
Fellow, Center for the History of Political Economy
Duke University
E-mail [log in to unmask]
Webpagewww.http://public.econ.duke.edu/~kdh9/
Telephone (919) 660-1876
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Primary mailing address:
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