42. Relating to Krugman, Phelps, Ormerod and Heilbroner & Milberg
Krugman, Phelps, Ormerod and Heilbroner & Milberg have produced forceful analyses on the current state of the economy, society and economic theory itself, and all with a distinct attention for unemployment. These authors agree on many points, but disagree on major points too. Interestingly, where these authors disagree, my own work offers new answers, on angles clearly not considered by them. My analysis solves conflicts, fills gaps, and complements on useful points. By relating my work to theirs I hope to enable these authors and their readers to plug into - what I consider - a new synthesis for (a renewed) mainstream economics.
Introduction
Mainstream economics appears to accept high rates of (equilibrium) unemployment as the apparent characteristic of the modern economy. In this view, unemployment is not inefficient, but the unavoidable price to be paid for other desirables. Take for example the case that the United States has low welfare provisions, less unemployment but more poverty and many prisons, while the European Union has high welfare provisions, high unemployment, less poverty and far fewer prisons: these differences then are explained in terms of political choices for example about institutions, labour market flexibility and employability; and it is suggested that such choices are made at the efficiency frontier. Research economists however are more focussed on the question whether current policy really is optimal and whether current unemployment is really (in-) efficient. The search is for a Pareto improving solution such that some can advance - notably the unemployed and the poor (underemployed) - without costs to the others.
Specifically, Paul Krugman, Edmund Phelps, Paul Ormerod, Robert Heilbroner & William Milberg) and myself have tried to supplement the mainstream approach. The first authors have received a lot of attention, but did not succeed in finding a Pareto improving solution to current unemployment. My analysis has received little attention, though I must confess that I did find such a solution.
In the following I’ll concentrate on the major issues, and then refer to that part of my own work that links to the work of these authors.
Review of positions and qualities
The other authors and myself have come up with different answers on the causes for and solutions to current unemployment. Table 18 reviews the different positions.
We may also note that most authors do not (explicitly) refer to each other. The reason for this may be practical, in that books that appear in 1995 may have difficulty to refer to Phelps (1994). We may also note that even though the inflation-unemployment relationship is crucial to the analyses of all, the focusses differ. Disagreement often leads to neglect rather than to explicit criticism, and it may well be that I have selected top scorers of different citation communities. However, all authors may be justified in neglecting one another. No one of them gives an essential contribution to the understanding of current unemployment. Theoretically their work might be skipped, as I did in practice while developing my analysis.