Generations of economics students have been inculcated with the Phillips Curve trade-off between
increased inflation and lower unemployment. It makes sense that attracting and retaining employees
when unemployed workers are harder to find puts upward pressure on wages, which transmits itself into
higher prices throughout the economy. That common sense relationship seems to have broken down,
however, during the past few decades. The questions arise: Is the Phillips Curve no longer valid?
Was it ever?
I believe the theory behind it remains valid, but that it's practical effect has attenuated due to two primary
determinants: (1) the rapid increase of globalization, most obviously in manufacturing...