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A. W. Phillips and a Century of British Wage Data

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A. W. Phillips and a Century of British Wage Data

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A. W. Phillips trained as an engineer before he became an economist, and it shows in how he approached his most famous paper. In 1958, he plotted British unemployment against the rate of change of money wages across nearly a hundred years, from 1861 to 1957, and found a strikingly consistent inverse relationship: years of low unemployment were years of rising wages, and years of high unemployment were years of flat or falling wages. He offered no grand theory to explain it, only the pattern in the data itself. Economists quickly relabeled the relationship in terms of price inflation rather than wage inflation and renamed it the Phillips Curve, and within a few years, Keynesian policymakers on both sides of the Atlantic began treating it as a menu, a government could choose a point on the curve, accepting a little more inflation to buy a little less unemployment, or the reverse. That confident reading did not survive the following decade intact, but Phillips's original contribution, a careful empirical regularity found in a century of real wage data, remains one of the most cited findings in the history of macroeconomics, however the theoretical debate over what causes it has since evolved.

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