EQUILIBRIUM, INFORMATION AND EFFICIENCY ‐ THE CASE OF THE N.A.I.R.U. Available to Purchase

Much attention has been devoted in the recent literature to temporal variations in the non‐accelerating inflation rate of unemployment (N.A.I.R.U.). Grubb, Layard and Symons (1984) note that the N.A.I.R.U. has increased over recent years, this observation being based on data ranging across 19 O.E.C.D. countries, including the U.S.A., the U.K. and Japan. Hargreaves Heap (1980) argues that choosing a “wrong” natural rate ‐ that is, setting actual unemployment “too high” above the N.A.I.R.U. as part of a counter‐inflation policy ‐ can be damaging since it might itself raise the long‐run equilibrium level of unemployment. A variety of justifications is given for this assertion, among which the depreciation of the value of unemployed human capital is prominent.