THE TRADE-OFF INTERPRETATION OF PHILLIPSS DYNAMIC STABILIZATION EXERCISE

This paper, which examines Phillips's famous curve, is based on Philli ps's private papers, and the London School of Economics Methodology, M easurement and Testing Seminar records (sources previously thought to be lost). These sources, plus Phillips's theoretical work, suggest tha t the equilibrium 'menu of choice' is a misinterpretation of Phillips' s dynamic stabilization exercise. Phillips had a clearly articulated r ole for inflationary expectations in his model, and had no toleration for the notion that ongoing inflation could purchase sustainable reduc tions in the rate of unemployment. Evidence is cited which indicates t hat Milton Friedman was profoundly influenced by Phillips's analysis o f inflationary expectations.