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My one economics course: or, how I hate the Phillips Curve

I majored in electrical engineering at LSU from 1983 to 1987. I had to take one economics course, my very first semester, which I ended up making an A in. But I did not like it. Never did like the idea of supply and demand curves, “elasticity” etc. I don’t think I had read much Austrian economics yet, though I had read a good deal of Ayn Rand’s nonfiction before I started college, and might have already read Hazlitt’s Economics in One Lesson. Maybe that is what turned me off to the conventional approach taught in Econ 2030.

I remember vividly that when the Phillips Curve was presented I knew something was wrong with mainstream economics. Here was a curve showing an inverse relationship between inflation and employment. That can’t be right, I thought–suppose all the unemployed people in the country died overnight. Most of them are unproductive or on welfare, so their loss would not harm the economy, so why would it make inflation go up? By my pro-capitalist lights, a free market could have zero inflation and almost full employment. I told the teacher my problem with the Phillips Curve; he explained that if all the unemployed people died, so that there was technically now 0% unemployment, the curve would “shift” to account for the new situation. Something like that. But that is cheating, just moving the goal post. It means it’s not really a curve, not really a relationship that explains anything.

When I discovered Austrian economics–mainly of the Misesian, Rothbardian, and Hoppean variety, I started to love economics.

{ 1 comment… add one }
  • dhlii July 25, 2011, 12:57 pm

    Isn’t the phillups curve the part of Keynesian economics that failed in the 70’s ?
    I know somehow everything keynesian has managed to resurface with the current crisis. Bit I thought this was atleast one aspect of Keynes that had been definitively put to rest. 10% inflation and 10% unemployment were supposed to be impossible.

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