In chapter 5, Edmond Malinvaud has produced a sympathetic and thoughtful review of my (1994) book. Let me begin by restating the book's intention, since some false impressions on that score have appeared here and there. The aim is to understand the causal forces and mechanisms behind lasting shifts and long swings in national unemployment rates. The impetus for this study, of course, is the rise over the 1970s and 1980s of joblessness to new plateaux in one Western country after another.

The approach taken begins with a theoretical study of the path of the general unemployment rate; an empirical section and a policy discussion follow. The vehicles for this study are a selection of what are termed ‘modern equilibrium’ models. By that term I mean models reflecting some of the imperfect information present in real-world markets (thus modern theory, not neoclassical theory such as the real-business-cycle or RBC models use) and postulating that the belief of firms and households about wages and prices are correct (until the next unforeseeable shock) – hence equilibrium theory, unlike the monetary employment theory of Keynes and Friedman in which agents have to do a lot of guessing. Hence the theory part of the book endogenises the path of the natural unemployment rate – a path to which the equilibrium unemployment rate is always tending. Such an approach is attractive if we are willing to bet that real-life economies, after the confusion following any shock or sea-change, tend toward their new equilibrium path.