Unemployment and Inflation. History Essay Research

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Unemployment and Inflation
Inflation and unemployment are crucial elements in any economic that can be used to determine the level of economic growth and the quality of life of the citizenly. Low employment rates are usually accompanied by high inflation rates that translate into high gross domestic product (GDP) growth rates increasing the overall welfare of the people. Policy makers in virtual economies strive to increase the employments rates while managing inflation as a determinant to future investment potentials. While historical aspects and classical definitions of unemployment and inflation with their roots in the 20th century have experienced tremendous transformations and meanings, their present applications towards economic growth rates remain relevant globally.
Employing effective, cost-saving means of production is key to improving economic growth rates by reducing unemployment rates and managing inflation levels. In his book, Worldly Philosophers: The Lives, Times, and Ideas of The Great Economic Thinkers, Heilbroner makes reference of Karl Marx’s capitalist model in which he postulates that in “an ideal capitalist world, no one makes a profit by merely sharp bargaining” (126). In an effort to increase profits through machinery as profitable and cheaper means of production, workers presumably lose their jobs. Marx’s model assumes that the cost of machinery is equal to the value produced in the production life of the machinery. However, this argument can be challenged with the present economies requiring machinery and automation to leverage on mass production while saving production costs by employing economies of scale. Statistics indicate that massive production achievable through mass production is directly linked to economic growth and reduced employment rates. According to Nord, Coleman-Jensen, and Gregory, reduced food production often leads to food insecurity that translates to worsening economic conditions marked by high unemployment rates (5). Their study suggests that reduced food production leads to increased food insecurity that is directly associated with high inflation and rising food prices as well as increasing unemployment rates. As indicated above, improvement of levels of production is essential in improving employment levels and inflation rates in any economy.
The correlation between unemployment and inflation has been an intriguing point of discussion since the 1960s. Conflicting statements concerning inflation and unemployment are featured by Heilbroner with several famed economists such as John Keynes and Friedman giving conflicting reports regarding the issue. While Keynes favored inflation, Friedman cautioned the possibility of depression with increased inflation. Keynes advocated for increased savings and investments as a catalyst to increased to employments and economic growth (Heilbroner 219). Friedman, on the other hand, conversely indicated that while such a policy would work in the short-run, the su...