Development
A classic statement regarding the natural rate appeared in Milton Friedman's 1968 Presidential Address to the American Economic Association :
- “At any moment of time, there is some level of unemployment which has the property that it is consistent with equilibrium in the structure of real wages … The ‘natural rate of unemployment’ … is the level that would be ground out by the Walrasian system of general equilibrium equations, provided there is embedded in them the actual structural characteristics of the labour and commodity markets, including market imperfections, stochastic variability in demands and supplies, the costs of gathering information about job vacancies, and labor availabilities, the costs of mobility, and so on.”
However, this remained a vision - Friedman never wrote down a model with all of these properties. When he illustrated the idea of the Natural Rate he simply used the standard text-book labor market demand and supply model that was essentially the same as Don Patinkin's model of the full employment. In this there is a competitive labor market with both labor supply and demand depend on the real wage and the natural rate is simply the competitive equilibrium where demand equals supply. Implicit in his vision is the notion that the Natural Rate is Unique: there is only one level of output and employment that is consistent with equilibrium.
Read more about this topic: Natural Rate Of Unemployment
Famous quotes containing the word development:
“Understanding child development takes the emphasis away from the child’s character—looking at the child as good or bad. The emphasis is put on behavior as communication. Discipline is thus seen as problem-solving. The child is helped to learn a more acceptable manner of communication.”
—Ellen Galinsky (20th century)
“And then ... he flung open the door of my compartment, and ushered in “Ma young and lovely lady!” I muttered to myself with some bitterness. “And this is, of course, the opening scene of Vol. I. She is the Heroine. And I am one of those subordinate characters that only turn up when needed for the development of her destiny, and whose final appearance is outside the church, waiting to greet the Happy Pair!””
—Lewis Carroll [Charles Lutwidge Dodgson] (1832–1898)
“For the child whose impulsiveness is indulged, who retains his primitive-discharge mechanisms, is not only an ill-behaved child but a child whose intellectual development is slowed down. No matter how well he is endowed intellectually, if direct action and immediate gratification are the guiding principles of his behavior, there will be less incentive to develop the higher mental processes, to reason, to employ the imagination creatively. . . .”
—Selma H. Fraiberg (20th century)