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Nobel prize winner says the U.S. needs a 1950s-style productivity boom
26 August 2022
Public

“We badly need to get back to economic growth,” Edmund S. Phelps, director of the Center on Capitalism and Society at Columbia University, told CNBC’s “Squawk Box Europe” on Wednesday. 

“By that I don’t mean an artificial temporary boom or a slower descent into lower employment, I mean that we’ve really got to get productivity growth on an upward climb approaching what it was in the 50s and 60s,” he said. 

 

Phelps was awarded the 2006 Nobel in Economic Sciences for his work challenging the Phillips Curve, the view, popular in the 1950s and 60s, that the price for reduced unemployment was a one-time increase in inflation. 

Phelps introduced the factor of inflation expectations into the Phillips Curve, showing unemployment is determined by the functioning of the labor market rather than inflation figures, so a stabilization policy can only diminish short-term fluctuations in unemployment.  

“A lot of people listening to this program might think, well gee whiz, after centuries of rapid growth, haven’t we had enough? We’re not starving anymore after all, what’s all this fuss about economic growth?” Phelps told “Squawk Box Europe.”

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