tag:blogger.com,1999:blog-4900303239154048192.post2189123708316199906..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Peter Diamond On The Slow Recovery Of EmploymentUnknownnoreply@blogger.comBlogger3125tag:blogger.com,1999:blog-4900303239154048192.post-59659849229403736402012-03-15T09:36:53.771-04:002012-03-15T09:36:53.771-04:00Would love to see those economic series
on various...Would love to see those economic series<br />on various things you had not seen before.spencerhttps://www.blogger.com/profile/09040914017546442297noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-17646025247377272172012-03-13T12:49:21.832-04:002012-03-13T12:49:21.832-04:00Peter,
The other Peter only briefly tossed off a ...Peter,<br /><br />The other Peter only briefly tossed off a line about the natural rate equaling NAIRU, although he definitely said it. He did talk about the Beveridge curve some, with it clearly delineating this relationship, even if it is not clear that its intersection with the 45 degree line is an equilibrium of any meaning or standing.<br /><br />What he did talk about it is how that curve can shift from time to time and apparently has in a bad way during the past few years. This became sort of his way of stating the appearance of these nastier macro effects going on in the job market, although that shift also presumably partly reflects these micro-based processes that lead to what he called the "breakdown" of the matching mechanism.<br /><br />There is also an obvious parallel between this discussion and that about the nature of at least real world, short-term Phillips curves, although he completely stayed away from that.Barkley Rosserhttps://www.blogger.com/profile/13114257724762074636noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-56516533922245259412012-03-13T02:18:15.307-04:002012-03-13T02:18:15.307-04:00Based on your account, Barkley, I'd say that D...Based on your account, Barkley, I'd say that Diamond left out an intermediate step in his discussion of labor market S&D.<br /><br />The traditional Beveridge Curve view, going back many decades, was that the 45-degree line, where unemployment equals vacancies, represented S=D in an S&D diagram, and that prolonged periods away from this line demonstrated that the labor market had no inherent tendency to clear -- good ol' fashioned Keynesianism.<br /><br />After search theory arrived on the scene (due in significant part to Diamond, of course), this assumption was challenged. Why should u=v have any significance at all, since it was a static condition in a dynamic setting? That is, search is about separating, matching and hiring, which are all rates denominated by time, so why would comparisons of u and v at some moment have any independent importance apart from their effects on the flows of consequence?<br /><br />The solution that was put forward was, as so often in economics, stationarity: the equivalent in search theory of S=D is the proportion of u to v that remains constant over time given the determinants of the component flows.<br /><br />I have always thought that this alternative is arbitrary, based on the assumption that the parameters we see at the moment are fixed through all eternity. Maybe Diamond's comment is that he agrees.<br /><br />To be clear, I think "equilibrium" is largely meaningless in a search model of the labor market, and the more interesting question is whether there is a meaningful notion of full employment. My rough and ready answer would be: pick a period during which your economy produced labor market outcomes that look like full employment to you, and call that u/v full employment. And perhaps Diamond is saying that stationary inflation (NAIRU) is that magic moment. That dissolves the meaning of "full employment" as something separate from price level dynamics, of course.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.com