Phillips, A(lban) W(illiam) (1914-1975)

New Zealand-born British economist, who developed the Phillips curve, a graph which appeared to show that there is a stable trade-off between inflation and unemployment which governments can exploit: they can choose less unemployment and more inflation, or less inflation and more unemployment, but they cannot choose to have less of both unemployment and inflation.

Phillips's 1958 essay on the relation between wages and unemployment gave birth to the Phillips curve, at least after others had substituted prices for Phillips's money wages. By the 1960s, the Phillips curve had been estimated for many countries and was part and parcel of orthodox macroeconomics. It was only later in the 1970s that doubts began to arise as new estimates revealed the Phillips curve to be highly unstable and subject to outward shifts and twists. In the late 1960s US economist Milton Friedman distinguished a short-run and long-run Phillips curve, insisting that the long-run Phillips curve is a vertical line at some ‘natural’ rate of unemployment, meaning that unemployment cannot be permanently reduced without causing ever-accelerating inflation. The short-run Phillips curve is indeed negatively inclined, as Phillips had believed, but arguments remain as to the length of this short-run and even the short-run Phillips curve is nowadays regarded as too unstable to constitute a firm basis for government policy. Within 25 years, the Phillips curve has moved from being a key link in modern macroeconomics to being a minor and probably misleading element in current explanations of inflation.

Phillips was born in Te Rehunga, New Zealand, into a farming family. At the age of 16 he left school, started working in an Australian mining camp, and began to study electrical engineering in the evenings. He arrived in London, England, in 1937, passed the examinations of the Institution of Electrical Engineers in 1938, worked for the London Electricity Board, and then joined the army, being taken prisoner of war in the Far East. It was only after World War II, at the age of 32, that he enrolled at the London School of Economics (LSE) as a sociology student. But his imagination was caught by the concept of the economic system as a hydraulic machine. He built a mechanical Keynesian-type model of the economy using flows of coloured water, whose design and potential use was the subject of his first article. As a result, he was offered a teaching post at the LSE. In 1952 he completed a doctoral dissertation and two years later had risen through the ranks to become professor of statistics at the LSE.

He published only six more papers in his remaining 13 years at the LSE, all of which were concerned with the problems of stabilizing an economy. In 1967, he left the UK to take a Chair at the Australian National University, hoping to take up the study of the economy of China. After suffering a severe stroke in 1970, however, he returned to his native New Zealand where he continued to teach part-time until his death in 1975.