ABSTRACT
This chapter argues that the economy suffers much "natural unemployment" and the implication is left that a goal of reasonably full employment is unrealistic. One question that the approach leaves unanswered is why historically the United States should be plagued by so much more "natural" unemployment than many other market economies. The "natural rate" view regards any acceleration of inflation as worse than secularly rising unemployment rates. The argument is more insidious than it may appear at first blush. If one postulates a non-zero natural rate of inflation, one can recast the entire argument of the shifting short-run Phillips curve to focus on a "natural" rate of inflation and an "inertial" rate of unemployment. The "natural inflation rate" hypothesis is as logical and explains the facts quite as well as the "natural unemployment rate" hypothesis. Inflation and unemployment are not "natural," and both point to failures of the economy to perform in an acceptable way.
