Unemployment rates

[Peter Kilander]

Brett:
>I have some fundamental questions about the unemployment rate itself.  Why
>does it exist in the first place?  Is there any THEORETICAL underpinning to
>the notion of a NAIRU?  Why is it that the unemployed 5% (or whatever it
>is) can't be added productively to the economy?  I mean, there's no law of
>physics which states than Unemployment < NAIRU = inflation, is there?

Well, actually there is the Natural Rate of Unemployment theory - key word
being "Natural" - which suggests that if unemployment goes below 6% or so,
all hell breaks loose. I remember this was fashionable back around '94, but
considering all evidence to the contrary it has yet to become law. Come to
think about it, I haven't heard much about it lately. It ranks up there with
all the anti-minimum wage theories.

Peter