The debate between Edmond Malinvaud and Edmund Phelps provides a significant contribution to the arguments on the unemployment problem, one of the most pressing social issues of our time. Naturally, it is demanding to discuss the review in chapter 5 of Phelps' Structural Slumps: The Modern Equilibrium Theory of Unemployment, Interests and Assets that pushes for a new line of (macroeconomic) thinking. Phelps' work has already been widely appraised by others (for instance, see Woodford, 1994). Hence, I can only be selective, and will discuss Phelps' book directly where appropriate. First, I deal with the general approach to the unemployment problem. Second, I explain where I follow Malinvaud's evaluation and where I depart from it. And finally, I examine more closely the central hypotheses behind the new theory of structural slumps.

Phelps' book and Malinvaud's chapter 5 aim at the understanding of unemployment in a rather general context. This is quite a demanding job – also on a macro level. As we have just learned from Charles Bean's survey on European unemployment (1994, p. 615), there seems to be no lack of hypotheses, but an insufficient ability of the data; we have to confess: