Nobel Laureate in Economic Science 2006

Edmund S. Phelps 是自99年 R. Mudell 之後, 第一個獨得諾獎的經濟學者, 可喜可賀.

side issue: 肥院當年教 monetary theory 也有提過expectation-augmentation (當然佢唔夠膽教數, 否則全班只會剩低幾丁友, 或好似第一、二堂之後, 俾人煩到嘔), 結果break 0既時候俾鄰座0既鬍鬚仔?撚住佢 哈哈哈哈哈~~~

side issue ii: jj 當年教macro, 都係0係0甘易講少少expectation; joe wu 就因為講dynamic programing、bellman equation、同"pon-tree-ar-gan" 講得太high, 冇教到 (但佢教0左stigliz 0既efficiency wage).

提到expectation augmented philips curve, 不可不提m. friedman. 《price theory》 入面有一整個chapter 聲討philips curve, 很精彩的. 詳情可以問鬍鬚仔.

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From http://nobelprize.org/

Press Release
9 October 2006

The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2006 to

Edmund S. Phelps

Columbia University, NY, USA

“for his analysis of intertemporal tradeoffs in macroeconomic policy”.

Short run – Long run
The work of Edmund Phelps has deepened our understanding of the relation between short-run and long-run effects of economic policy. His contributions have had a decisive impact on economic research as well as policy.

Low unemployment and low inflation are central goals of stabilization policy. During the 1950s and 1960s the view of a stable tradeoff between inflation and unemployment was established, the so-called Phillips curve. According to this, the price for reduced unemployment was a one-time increase of the inflation rate. Phelps challenged this view through a more fundamental analysis of the determination of wages and prices, taking into account problems of information in the economy. Individual agents have incomplete knowledge about the actions of others and must base their decisions on expectations. Phelps formulated the hypothesis of the expectations-augmented Phillips curve, according to which inflation depends on both unemployment and inflation expectations.

As a consequence, the long-run rate of unemployment is not affected by inflation but only determined by the functioning of the labor market. It follows that stabilization policy can only dampen short-term fluctuations in unemployment. Phelps showed how the possibilities of stabilization policy in the future depend on today's policy decisions: low inflation today leads to expectations of low inflation also in the future, thereby facilitating future policy making.

Another issue where intertemporal tradeoffs are of central importance concerns the desirable rate of capital formation. By foregoing consumption for investment in physical as well as human capital (education and research), today's generation can raise the welfare of future generations. Phelps clarified possible distributional conflicts among generations. He also showed that all generations may, under certain conditions, gain from changes in the savings rate. Phelps also pioneered the analysis of the importance of human capital for the diffusion of new technology and, hence, for growth.