Phillips Curve

The Phillips curve is the proposed inverse relationship between unemployment and inflation: when unemployment falls, wages and prices are pushed up, and vice versa. It originates with economist A.W. Phillips, whose 1958 study of British wage data from 1861 to 1957 found the pattern, and it became a cornerstone of postwar policy thinking that governments could buy lower unemployment with a little more inflation.

Why it matters

The curve's breakdown reshaped economics. The 1970s delivered stagflation, high inflation and high unemployment simultaneously, which the simple curve said should not happen, and the experience elevated the Friedman-Phelps critique that the trade-off vanishes once people expect the inflation. Modern versions add expectations and supply shocks, but the relationship has been empirically weak for decades, with economists debating whether the curve is flat, dead or merely dormant. Central banks still use its descendants in forecasting, which critics consider steering by an unreliable map.

In the gold vs bitcoin debate

The Phillips curve matters here as the intellectual scaffolding for discretionary money: if inflation buys employment, a flexible currency is a policy tool worth having, which is the standard argument against gold standards and fixed-supply money. Hard-money advocates read the 1970s as the decisive counterexample, a decade when the trade-off failed, the dollar lost roughly half its purchasing power, and gold rose from $35 to over $800 an ounce. Bitcoin's fixed issuance is a bet that no such trade-off is worth trusting a committee to manage.