Intertemporal Choice in Macroeconomic Policy: Edmund Phelps’ Contribution to Economic Concept

Abstract

On October 9, 2006, the Royal Swedish Academy of Sciences awarded the Swedish Central Bank's Nobel prize in Economics to Professor Edmund Phelps of Columbia University for "analysis of intertemporal choice in macroeconomic policy". This phrase hides the cycle of Phelps' work on explaining the relationship between inflation and unemployment in the short and long term, which found its implementation in the modified (added expectations) Phillips curve. As the Swedish Central Bank said in a press release: "this work has had a huge impact on theoretical research and macroeconomic policy." In addition, the press release notes Phelps' research on the intertemporal choice between consumption and investment, where he deduced the impact of the savings rate on the distribution of wealth between generations, and the importance of human capital accumulation in the spread of technology.
The purpose of this essay is to analyze Nobel prize-winning concepts and evaluate their impact on economic thought.