11. Friedman’s theory was based on economic data.
Economist William Phillips, described an inverse relationship found between the rates of inflation and the rates of unemployment. He suggested that when unemployment decreased, inflation rose. These suggestions were based on empirical generalisations. While this worked between the years of Philips’ assessment, economist Milton Friedman later asserted that Philips’ empirical model was only valid in the short-term. In the long run, inflation would not decrease unemployment. As predicted, during the 1973-75 recession, the UK and USA economies stagnated, and both unemployment and inflation increased. Since Friedman’s improvement, Philip’s model is no longer used by most economists – it is argued to be too simplistic. Later developing theories aim to correlate to data.