511: The Zombie Economics of Inflation and Unemployment

Today's guest (Prof. Alex Salter) recently joined Phil Magness and wrote an article for The Hill outlining how bad economic ideas can have a frustratingly long shelf life. Amid surging consumer and producer prices, the apparent tradeoff between inflation and unemployment has become a hot topic.

There’s just one problem: the tradeoff doesn’t exist.

Economists have known this for 40 years. Policymakers and commentators asserting otherwise should get with the program.

"In policymaking circles - public economics commentators - (those sorts of positions), there persists this myth that there's a steady and exploitable trade-off between unemployment and inflation.

The idea is you can quote-unquote, "run the economy hot", in which case you're gonna get low unemployment, but you have to put up with high inflation.

Or if you want to try and bring down inflation, you have to put up with not-so-good labor markets, and higher unemployment.

In brief, this view is bogus. There's nothing to it.

There is absolutely no reason why you can't have strong labor markets, and low and stable inflation. You can even have strong labor markets with no inflation."