The Trade-off Interpretation of Phillips's Dynamic Stabilization Exercise.

This paper, which examines A. W. Phillip's famous curve, is based on Phillip's private papers and the London School of Economics Methodology, Measurement and Testing Seminar records (sources previously thought to be lost). These sources, plus Phillip's theoretical work, suggest that the equilibrium 'menu of choice' is a misinterpretation of Phillip's dynamic stabilization exercise. Phillips had a clearly articulated role for inflationary expectations in his model and had no toleration for the notion that ongoing inflation could purchase sustainable reductions in the rate of unemployment. Evidence is cited which indicates that Milton Friedman was profoundly influenced by Phillip's analysis of inflationary expectations. Copyright 1997 by The London School of Economics and Political Science