ABSTRACT
In the previous three chapters we have considered the theory and evidence relating to unemployment in excess of the natural rate. We have seen that some modern classical economists believe no policy is necessary for the removal of such unemployment since it is self-eliminating. However, that does not mean that such economists believe no policy is necessary. On the contrary there is a great emphasis placed on the need to reduce the natural rate of unemployment. In order clearly to detail an appropriate policy it is necessary to outline an empirically satisfactory theory of the natural rate. Indeed even for those who accept the theoretical and empirical case for non-natural unemployment the calculation of the natural rate of unemployment is necessary to assess its residual extent. Moreover, few economists believe that the reduction of unemployment to its natural level will leave no substantial unsolved problems. Policies for reducing https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780429422935/6f6ebc57-196a-45df-af33-ef277a806334/content/ust.tif"/> are likely to be just as important in reducing unemployment as policies to reduce the non-natural level. Consideration of the determinants of the natural rate and of forces that increase (and decrease) its level is therefore necessary. This is the purpose of this and the next chapter.
