[Roy, remember you have a delete button ready at hand.]

Strapped as I  am with only the internet, the library of a small provincial university, and  the Society's e-mailed conversations, I try to satisfy my curiosity about the history of an idea that appears in different forms in different policy circumstances.

On the one hand I have a book review on the web stating "... there is also the idea of the Taylor Curve ... .  The diagram has a vertical axis that denotes the variance of output.  The variance of inflation is shown on the horizontal axis."
On the other hand I have Lipsey's  two versions of the Philips curve (Blaug and Lloyd, Famous Figures and Diagrams in Economics, p. 378.  Lipsey's second diagram has the rate of inflation on the vertical axis and (at least implicitly) the rate of increase in real output on the horizontal axis.

By putting output on the horizontal axis it would seem that Lipsey intended output to be the independent variable, but that is not the case.  He interprets this Phillips curve to be an aggregate supply curve in which rising prices cause the increase in output.  There seems to be no reason for not drawing the diagram with the increase in prices on the horizontal axis as does Taylor.

So, what to make of this?  Taylor suggests adjusting the interest rate to counter act variance in the rate of inflation and the rate of increase in real output.  In short, he is suggesting the use of monetary policy to generate a stable and muted trade off between inflation and unemployment (output).  He is  suggesting a means of taking inflation expectations out of the Phillips curve.   How to achieve the Great Moderation.

Needless to say, there is much more that can be made of this.

Robin Neill