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How the Phillips Curve Shaped Full Employment Policy in the 1970s: The Debates on the Humphrey-Hawkins Act

Author

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  • Aurélien Goutsmedt

    (ISPOLE - Institut de Sciences Politiques Louvain Europe - Institut de Sciences Politiques Louvain Europe)

Abstract
This article relates the history of economists' influence in shaping the content of the Humphrey-Hawkins Act (1978) and its immediate consequences. The act committed the federal government to reducing unemployment to 4 percent and inflation to 3 percent as soon as 1983. Initially, the Humphrey-Hawkins bill was conceived as a project to favor the economic integration of African Americans and economic planning and targeted only the unemployment rate. Republican senators successfully pushed for adding a numerical inflation target during the debates in Congress. The act eventually put on equal footing inflation and unemployment. This article argues that the economists in the Carter administration, and notably the Council of Economic Advisers, were instrumental, even if unintentionally, in favoring the integration of an inflation target and such an interpretation of the bill. In the negotiations that opposed them to the supporters of the bill, as well as in the analysis of the bill they produced, they insisted on the existence of a trade-off between inflation and unemployment and referred frequently to the famous Phillips curve. They endeavored to anchor their expertise on academic publications, which strengthened the role of the Phillips curve in shaping the debates. Business organizations and senators used references to the trade-off to undermine the bill and favor the integration of an inflation target.

Suggested Citation

  • Aurélien Goutsmedt, 2022. "How the Phillips Curve Shaped Full Employment Policy in the 1970s: The Debates on the Humphrey-Hawkins Act," Post-Print hal-03878346, HAL.
  • Handle: RePEc:hal:journl:hal-03878346
    DOI: 10.1215/00182702-9895846
    Note: View the original document on HAL open archive server: https://hal.science/hal-03878346
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    References listed on IDEAS

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    1. Robert E. Hall, 1971. "Prospects for Shifting the Phillips Curve through Manpower Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 659-702.
    2. Aurélien Goutsmedt & Goulven Rubin, 2018. "Robert J. Gordon and the introduction of the natural rate hypothesis in the Keynesian framework," Post-Print halshs-01821825, HAL.
    3. Aurélien Goutsmedt, 2021. "From the Stagflation to the Great Inflation: Explaining the US economy of the 1970s," Revue d'économie politique, Dalloz, vol. 131(3), pages 557-582.
    4. Roberto Romani, 2018. "On science and reform: the parable of the new economics, 1960s–1970s," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 25(2), pages 295-326, March.
    5. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
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    7. repec:ucp:bkecon:9780226519944 is not listed on IDEAS
    8. Burgin, Angus, 2012. "The Great Persuasion: Reinventing Free Markets since the Depression," Economics Books, Harvard University Press, number 9780674058132, Spring.
    9. Forder, James, 2014. "Macroeconomics and the Phillips Curve Myth," OUP Catalogue, Oxford University Press, number 9780199683659.
    10. Johnson, George E & Blakemore, Arthur, 1979. "The Potential Impact of Employment Policy on the Unemployment Rate Consistent with Nonaccelerating Inflation," American Economic Review, American Economic Association, vol. 69(2), pages 119-123, May.
    11. Daniel L. Thornton, 2012. "The dual mandate: has the Fed changed its objective?," Review, Federal Reserve Bank of St. Louis, vol. 94(Mar), pages 117-134.
    12. Prasad, Monica, 2006. "The Politics of Free Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226679013, April.
    13. W. Robert Brazelton, 1997. "Retrospectives: The Economics of Leon Hirsch Keyserling," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 189-197, Fall.
    14. Helen Ginsburg, 2012. "Historical Amnesia: The Humphrey-Hawkins Act, Full Employment and Employment as a Right," The Review of Black Political Economy, Springer;National Economic Association, vol. 39(1), pages 121-136, March.
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    Cited by:

    1. Alexandre Chirat & Basile Clerc, 2023. "Convergence on inflation and divergence on price-control among Post-Keynesian pioneers: insights from Galbraith and Lerner," EconomiX Working Papers 2023-4, University of Paris Nanterre, EconomiX.

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