Alban William Phillips
Alban William Phillips was born on 18 November 1914 in Te Rehunga, New Zealand, died 4 March 1975 in Auckland, New Zealand. He was a British economist, adherent to Keynesian Theory. He is most well known for constructing Phillips Curve showing relation between the unemployment rate and inflation rate.
A. W. Philips studied electrical engineering in New Zealand and in 1937 he immigrated to Great Britain. After the Second World War (1946-1949) he studied sociology at the London School of Economics (LSE), but soon switched his course to economics and within 11 years he became a professor of economics at the statistics department in LSE. 9 years later, in 1967, he left England and went to Australia to teach at Australian National University in Canberra. Then he went back to Auckland, New Zealand where he worked at the University of Auckland.
Economic achievements
In November 1958, during his work as a lecturer at LSE, he published his most well known article The Relation Between Unemployment and the Rate of Change on Money Wage Rates in the United Kingdom 1861-1957 in "Economica". He presented there in the graphic form (nowadays called Phillips Curve) the inverse relation between the unemployment rate and the inflation rate in an economy. Empirical correlation between these macroeconomic indicators was theoretically interpreted by Samuelson and Solow.
Phillips article was an impulse to begin a discussion whether to limit the rate of unemployment or rather aim to decrease rate of inflation, as it is impossible to gain both of these goals simultaneously. His theory was very popular during the 60's and was one of the principles of modern macroeconomics. Then it became a base for theoretical explanation of the causes of stagflation.
Interesting facts
It is very probable that had Phillips lived longer he would have received a Nobel Prize in Economic Sciences. He died relatively early, compared with other Nobel Prize laureates, at the age of 61.
Up until 1944 Phillips had never studied economics. He graduated with a diploma in electrical engineering and then studied sociology. He started his formal education in the field of economics in his 30's and only 10 years later became a professor. It is a great achievement and confirms huge economics talent of Alban William Phillips.
Examples of Alban William Phillips achievements
- Phillips Curve: Phillips Curve is an economic concept that illustrates the relationship between the unemployment rate and the rate of inflation in an economy. The curve was developed by Alban William Phillips in 1958 and is widely used in macroeconomic analysis. The Phillips Curve posits that there is a trade-off between inflation and unemployment, as lower unemployment rates tend to lead to higher inflation rates.
- Keynesian Theory: Alban William Phillips was an adherent of Keynesian Theory, which is an economic theory developed by British economist John Maynard Keynes in the 1930s. Keynesian Theory argues that government intervention in the economy is necessary to ensure economic stability and growth. It posits that in times of recession, the government should increase spending and lower taxes in order to stimulate the economy and reduce unemployment.
Advantages of Alban William Phillips approach
Alban William Phillips is known for his contributions to economics, particularly the Phillips Curve. Some of the advantages of his work include:
- His work led to a greater understanding of the relationship between unemployment and inflation. This helped to inform economic policy decisions, as well as providing a better understanding of the various economic cycles.
- He developed a new way of interpreting economic data, which allowed for more accurate predictions of economic outcomes.
- His work helped to create a more accurate economic model, which could be used to make more accurate predictions about the future.
- His work has helped to shape the way economists approach economic policy decisions, as well as macroeconomic theory.
- His work has been widely influential in the field of economics, and is still studied and discussed today.
Limitations of Alban William Phillips approach
Alban William Phillips had several limitations to his work:
- Phillips did not consider the effects of expectations on inflation and unemployment, which are now known to be important determinants in the relationship between the two.
- His analysis did not factor in the supply side of the economy, such as the impact of productivity or the supply of labour, which are also important considerations in determining unemployment and inflation.
- His work did not take into account the effects of monetary policy, which is another important factor in understanding the relationship between inflation and unemployment.
- Phillips' work was based on data from a single country, the United Kingdom, and may not be applicable to other countries with different economic structures.
- His work did not consider the long-term effects of inflation and unemployment, which can have significant implications for economic growth and stability.
Alban William Phillips is widely recognized for his construction of the Phillips Curve, which showed the relation between the unemployment rate and inflation rate. However, he is also noted for his contributions to other economic theories as well. These include:
- The monetary overhang theory, which states that an increase in the money supply causes inflation when the velocity of money is constant.
- The asset demand for money theory, which states that demand for money is derived from the demand for assets.
- The Phillips effect, which states that an increase in wages leads to an increase in prices.
In summary, Alban William Phillips is known for his contributions to the Phillips Curve, the monetary overhang theory, the asset demand for money theory, and the Phillips effect. These theories have had a lasting influence on economics and continue to be studied to this day.
| Alban William Phillips — recommended articles |
| Arthur Okun — IS-LM model — David Ricardo — Alfred Marshall — Thomas Robert Malthus — Austrian business cycle theory — Milton Friedman — Engel's law — Green shoots — Stock position |
References
- Leeson, R. (1995). AWH Phillips: his machine and his curve. New Zealand Economic Papers, 29(2), 231-243.
- Leeson, R. (1997). AWH Phillips.
- Phillips, A. W. H. (1962). Employment, inflation and growth: an inaugural lecture. Bell.
- Phillips, A. W. H., & Leeson, R. (2000). AWH Phillips: Collected Works in Contemporary Perspective. Cambridge University Press.
- Phillips, A. W. H., & Bergstrom, A. R. (1978). Stability and inflation: a volume of essays to honour the memory of AWH Phillips. John Wiley & Sons.
- Ravier, A. O. (2012). Dynamic Monetary Theory and the Phillips Curve with a Positive Slope. Available at SSRN 2230461.
Author: Weronika Buczak
