Edmund Phelps, a professor of economics at Columbia University has won the 2006 Nobel Prize in economics. Professor Phelps was honored for his work done in the 1960’s that challenged the prevailing notion that there was a long run trade off between inflation and unemployment that could be used to steer macro policy. (See pages 348-352 on the Phillip’s Curve in Chapter 13 in Colander’s Macroeconomics.) Phelps helped to demonstrate that governments could not likely lower the unemployment rate by accepting a higher inflation rate, and thus “fine-tune” (page 239) the economy. His contributions helped economists understand the root of soaring prices and unemployment in the 1970s, commonly called “stagflation”.
You can listen to a background story on this year’s economics prize, and hear an interview with Phelps on National Public Radio NPR). The Marketplace radio program from American Public Media also has a report on the economics prize, called “New inflation thinking captures Nobel Prize”.