Phillips Curve

long time without an update, i wonder what we are busy with? :) anyway it is hard to maintain this blog when we know that they are hardly any readers. so minion-readers, publicise the blog with your fellow ki-mates. spread the love man. come to think of it, it is really a vicious cycle. never mind, i shall be more proactive now.

(oh and deathnote, you totally took t-lympho's first art entry!)


this is the phillip's curve, created by A.W. Phillips during the 1960s.

what?

• curve created from data gathered on the relationship between inflation and unemployment in UK between 1861 and 1967.
• curve shows an INVERSE relation between inflation and unemployment, i.e. as unemployment decreases, inflation increases (higher wages for all!).

but...

• governments understood the curve as there being a trade off between unemployment and inflation

so?

• governments allowed inflation rates to increase, hoping that unemployment rates would then decrease.

HOWEVER!

• the philips curve broke down.
• 1970s: many countries experienced increased inflation together with increased unemployment instead.

questions/usage

• correlation =/= cause (if two variables are correlated, it does not mean that they cause each other, i.e. fallacy of post hoc ergo propter hoc)
• in this phillips curve case, there could be 3 types of explanations for the correlation -
• 1. A cause B
• 2. B cause A
• 3. C cause A & B.
• definitely for use in social science.

sources

• wiki: phillips curve
• theory of knowledge by Richard van de Lagemaat

\ \ / / bam.