An Optimal Unemployment Rate: Comment
Abstract
Dobell and Ho have recently presented in this Journal 1 an aggregate model of the
economy in which unemployment may be optimal with respect to a maximum consumption-over-time
criterion. They carefully abstract from Phillips curve-type trade-offs involving the
price level, or from frictional unemployment. Rather, they extend optimal capital
accumulation models to include, in effect, human capital, with training costs and
mortality considerations introduced. Their treatment of investment in training is
analogous to wellknown results with respect to investment in physical capital. As
is the case with respect to physical capital, there is some level beyond which consumption
is diminished by further "human capital" accumulation. Costs of training (analogous
to gross saving and investment) exceed returns, so that output remaining for consumption
(output less investment in physical capital and less resources used in training) is
lower than it might otherwise be. Dobell and Ho conclude that some unemployment (of
"untrained" humans) may be consistent with maximum aggregate consumption through time.
They mention the possibility of transfer payments to the unemployed, of course, though
they are necessarily concerned with questions of production, not distribution..................
Type
Journal articlePermalink
https://hdl.handle.net/10161/2115Citation
Blackburn, J. O. (1969). AN OPTIMAL UNEMPLOYMENT RATE: COMMENT. Quarterly Journal
Of Economics, 83(3), 518-520.
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