Sunday, March 1, 2009

Tobin's view on unemployment

As an engineer who enjoy studying economics, I have been ridiculed by those who think they know how the markets work. While during my graduate studies at the University of Toronto, I made a comment about the fact that no level of unemployment rate (i.e., greater than 0) should be accepted as the optimum rate. Economists in the room smirked. They later told me that it was okay for me to think like that because I was an engineer. Had I been an economist, I'd have understood the concept of the optimum unemployment rate.

Well, I wish I had read more of James Tobin who believed that the optimum unemployment rate was zero. Oliver Staley and Michael McKee writing for Bloomberg quoted Professor Joseph Stiglitz:

"As a young professor I did a paper where I analyzed the optimal unemployment rate," said Joseph Stiglitz, a professor at Columbia University in New York, who knew Tobin at Yale. "Tobin went livid over the idea. To him the optimal unemployment rate was zero."

You can read more about the Bloomberg article on Tobin by clicking HERE.

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