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This is the VOA Special English Economics Report.
Edmund S. Phelps has been awarded this year's Nobel Prize for economics. Mr Phelps is the professor of economics at Columbia University in New York City. The Royal Swedish Academy of Sciences honored Mr Felfs for his work in macroeconomics. That is the study of large forces that affect the economies at the national or international level.
Mr Phelps correctly identified the relationship between unemployment and inflation. Since the 1930s, policymakers in many nations dealt with unemployment in the same way. They would let inflation increase to create jobs. For example, they would make credit easier to get. As a result, people would buy more goods. Businesses would hire workers to meet growing demand, forcing prices up. For many years, policymakers accepted that reducing unemployment required higher inflation, Mr Phelps found that inflation did temporarily increase employment. But he discovered that over the long term, inflation hurt job creation.
His ideas were proved by economic conditions in America in the 1970s. That peiord was known for stagflation, having high unemployment and high inflation at the same time. Edmund S. Phelps also found that if employers expect low inflation in the future, they are more likely to hire workers. Today economic policy experts believe the best way to create jobs is to fight inflation.
Mr Phelps also studied national savings over long periods of time. Common sense suggests that a very high saving's rate is best. But Mr Felb showed that national saving's rates can be too high. He argue that saving too much limited demand in the present which could slow growth. The best saving's rate is not so high that it limits demand in the present. And it is not so low that it limits growth and investment in the future. Still he argued that governments should take action to raise national savings.
Edmund S. Phelps did much of his research in macroeconomics during the late 1960s and early 70s. His work continues to influence economists. And it has helped change policy at central banks which now consider fighting inflation a main goal. Mr Phelps will receive about $1,400,000.
And that's the VOA Special English Economics Report written by Mario Ritter. Transcripts and archives are at voaspecialenglish.com. I'm Bob Doughty.
