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Edmund Phelps’s Austrian Roots

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This week’s EconTalk is with Edmund Phelps [2], the 2006 Nobel Laureate in economics. It starts slowly. The diligent listener will profit from reading his Nobel lecture [3] and reading the narrative found on his home page [4] before listening.

I found the conversation much more interesting as it went along. Phelps critiques Friedman’s work on the natural rate of unemployment, praises and criticizes Keynes and talks about the importance of disequilibrium in understanding markets, particularly the market for labor. What I found particularly interesting is Phelps’s explicit recognition of the influence of the Austrian school on his thinking. Paradoxically, Phelps uses very formal, mathematic models to capture essential Austrian ideas about uncertainty and its effect on markets and prices. His views on innovation also draw heavily on Hayek and Schumpeter.

I had read very little of Phelps’s work before scheduling this podcast. Looking forward to reading more.