Up the NAIRU without a paddle

IN 1968 Milton Friedman and Edmund Phelps, in papers written independently, assaulted the prevailing consensus on unemployment. They said it was wrong to suppose, as most economists had up to then, that governments could lower the rate of unemployment if only they would accept a little more inflation. This imagined trade-off, they argued, was a trap: governments that tolerated higher inflation in the hope of lowering unemployment would find that joblessness dipped only briefly before returning to its previous level, while inflation would rise and stay put.