A Great Nobel Prize

Edmund Phelps won the Nobel Memorial Prize in Economics today.  It was a great decision.  In fact, the draft of my forthcoming book, Businomics, said:

This breakdown in the traditional relationship between inflation and unemployment had been anticipated by two economists.  Milton Friedman, who would later be awarded the Nobel Prize, and Edmund Phelps, who deserves a Nobel, independently developed the following idea:  In the long run, there is no tradeoff between unemployment and inflation.

Phelps’s work was fairly recent when I was a graduate student, and it played an important role in the direction I went in doctoral dissertation.  More importantly, Phelps and Friedman laid the groundwork for decisions by the Federal Reserve and other central banks around the world to keep inflation low.  Today, inflation is low almost everywhere in the world, which is a far cry from the high inflation rates suffered by both developed and less developed countries in the 1970s.  Our economy is growing faster, and with fewer recessions, because of this policy shift.  Phelps deserves great recognition for his work.  Hurrah!