THE NATURAL RATE MOVES - A REVIEW-ESSAY OF PHELPS,EDMUND STRUCTURAL SLUMPS

This review essay of Edmund Phelps' Structural Slumps. The Modern Equi librium Theory of Unemployment, Interest and Assets argues that Struct ural Slumps is an important book, which enriches neo-classical economi cs and has substantive things to say about the persistence of high une mployment rates in many industrial countries. However, the book does n ot substantiate Phelps' own claims that the structural approach repres ents a new paradigm in economic theory and that the new paradigm is th e only convincing explanation for persistently high levels of unemploy ment. With respect to the first claim it is argued that the structural ist approach is not fundamentally different from neo-classical macroec onomics. With respect to the second claim it is illustrated that the e mpirical evidence is inconclusive as far as the alleged superiority of the structuralist approach is concerned.