Antonella Stirati*

Walter Paternesi Meloni**

ABSTRACT

A major contribution of Friedman’s 1968 presidential address was the long run vertical Phillips curve. This view, which is consistent with neoclassical foundations, has become so profoundly entrenched in macroeconomists’ way of thinking that increasing evidence of ‘hysteresis’ has not as yet discarded it. Although the notion of the nairu now prevails on that of the ‘natural’ unemployment rate, implying some changes concerning the factors that are seen as its main determinants, the macroeconomic features of Friedman’s natural rate and the nairu are very much the same.

Yet the blatant path-dependence of empirically estimated nairus currently determines a paradoxical dissociation between theory and empirics, which in our view must call for a change in perspective. Adopting an alternative theory of distribution and employment might rehabilitate the old, original approach taken by Phillips vis à vis Friedman’s legacy.