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The History Of The Phillips Curve

            
             The Phillips Curve has been vital for over 25 years in macroeconomics models. Phillips that in 1958 gave the best repression of the modern formulation of the curve. The technical representation is that w = f(u) which is related to the rate of wag inflation w via the function f() to the excess demand for labor as measured by U, the deviation of unemployment form its equilibrium or labor market clearing rate. (Humphrey p.5). The curve also transformed through the assumed markup of prices over wages into the price-change equation p=f(u), where p is the rate of price inflation. (Humphrey p. 5). This curve is still used and is the modern why to show the relationship between rate of change of price and unemployment. .
             The early versions of the Phillips Curve where focused around the idea that an inflation-unemployment trade-off. Some other versions where looked at by David Hume( 1752) and Henry Thornton(1802). Not until 1958 where the Phillips Curve was looked at more in detail. In 1958, A.W. Phillip's published an article in which he suggested the formula for w=f(u) to annual data on percentage rates of change of money wages (w) and the unemployment rate(u) in the United Kingdom for the period 1861-1913 ( Humphrey p.13). The Curve came fourth with a self-explanatory version of the actual curve. The curve showed very clearly that the response of wages to the excess demand for labor as proxied by the inverse of the unemployment rate (Humphrey p.15). In other words, low unemployment meant high excess demand and thus upward pressure on the wages. Another way is that the more unemployed you have the less demand that you have. .
             The Phillips Curve was looked at to define the relationship between labor force and the price level. The Curve was looked at before Phillips to try and define the relationship in a usable chart that could be understood by many very easily.
            


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