 From the Ludwig von Mises Institute, this is the Mises Report, a public policy and economic issues commentary series. In this program we present another part of ten great economic myths. The material heard today was prepared by Murray and Rothbard, Ph.D., of New York Polytechnic Institute for the Mises Institute. Myth number six. There is a trade-off between unemployment and inflation. Every time someone calls for the government to abandon its inflationary policies, establishment economists and politicians warn that the result can only be severe unemployment. We are trapped therefore into playing off inflation against high unemployment and become persuaded that we must therefore accept some of both. This doctrine is a fallback position for Keynesians. Originally the Keynesians promised us that by manipulating and fine-tuning deficits and government spending they could and would bring us permanent prosperity and full employment without inflation. Then when inflation became chronic and ever greater, they changed their tune to warn of the alleged trade-off so as to weaken any possible pressure upon the government to stop its inflationary creation of new money. The trade-off doctrine is based on the alleged Phillips Curve. A curve invented many years ago by British economist A.W. Phillips. Phillips correlated wage rate increases with unemployment and claimed that the two move inversely. The higher the increases in wage rates, the lower the unemployment. On its face, this is a peculiar doctrine since it flies in the face of logical common-sense theory. Theory tells us that the higher the wage rates, the greater the unemployment and vice versa. If everyone went to their employer tomorrow and insisted on double or triple the wage rate, many of us would be promptly out of a job, yet this bizarre finding was accepted as gospel by the Keynesian Economic Establishment. By now it should be clear that this statistical finding violates the facts as well as logical theory. During the 1950s inflation was about only 1 or 2% per year and unemployment hovered around 3 or 4%. Whereas nowadays unemployment ranges between 8 and 11% and inflation between 5 and 13%. In the last two or three decades in short, both inflation and unemployment have increased sharply and severely. If anything, we have a reverse Phillips Curve. There has been anything but an inflation unemployment trade-off. But ideologues seldom give way to the facts, even as they continually claim to test their theories by facts. To save the concept, they have simply concluded that the Phillips Curve still remains as an inflation unemployment trade-off, except that the curve has unaccountably shifted to a new set of alleged trade-offs. On this sort of mindset, of course, no one could ever refute any theory. In fact, inflation now will only create more unemployment in the long run, even if it reduces unemployment in the short run by inducing prices to spurt ahead of wage rates, thereby reducing real wage rates. Eventually, wage rates catch up with inflation and inflation brings recession and unemployment inevitably in its wake. After more than two decades of inflation, we are now all living in that long run. 3-6-849