The natural rate moves! A review essay of Edmund Phelps' structural slumps

Summary This review essay of Edmund Phelps' Structural Slumps.The Modern Equilibrium Theory of Unemployment, Interest and Assets argues thatStructural Slumps is an important book, which enriches neoclassical economics and has substantive things to say about the persistence of high unemployment rates in many industrial countries. However, the book does not substantiate Phelps' own claims that the structural approach represents a new paradigm in economic theory and that the new paradigm is the only convincing explanation for persistently high levels of unemployment. With respect to the first claim it is argued that the structuralist approach is not fundamentally different from neo-classical macroeconomics. With respect to the second claim it is illustrated that the empirical evidence is inconclusive as far as the alleged superiority of the structuralist approach is concerned.We would like to thank Lex Hoogduin, Simon Kuipers and an anonymous referee for useful comments. Of course, the usual disclaimer applies.