vinegarScientific advances To paraphrase Max Planck, we go through one funeral at a time. The Nobel Prize-winning physicist argued that new ideas are only accepted in his field once the proponents of the old have died out. With a little embellishment, he would have been describing the gloom of science as well. Economics progresses through one crisis at a time. The Great Depression provided fertile ground for the theories of John Maynard Keynes, the Great Inflation of the 1970s popularized Milton Friedman's monetarist ideas, and the 2007-2009 global financial crisis boosted interest in credit and banking.
Sure enough, the recovery from the COVID-19 pandemic has presented economists with new opportunities to learn from their mistakes.Australia) offers clues about a theory that may eventually become common knowledge for the next generation.
One such paper delves into the Phillips curve, which describes the theoretical trade-off between unemployment and inflation. The logic is that when unemployment is low, inflation should be high because competition for workers puts upward pressure on wages. This in turn leads to higher consumer prices. But in the 2010s, the curve seemed to disappear: unemployment continued to fall, but inflation remained stationary. Then, after the pandemic, the relationship suddenly seemed to reappear: inflation rose as fast as unemployment fell.
