For 25 years, theory about the causes of, and possible solutions to, the problem of unemployment has been dominated by Phelps' and Friedman's natural rate of unemployment hypothesis. This postulates that the equilibrium rate of unemployment consistent with steady inflation is determined by structural variables: sustainable reductions in unemployment can be achieved only by measures to change underlying microeconomic structures, such as benefit and pay bargaining systems. Belief in the hypothesis has faltered since the 1980s, the hypothesis being unable to explain the dramatic upward shifts in European unemployment rates. These essays reflect upon the fundamental structures underlying the hypothesis, assess the related evidence, and look forwards, suggesting possible modifications. In contrast to the single rate postulated by the natural rate hypothesis, several of the contributors propose that there are ranges of unemployment rates consistent with steady inflation.

" The 17 essays in this volume discuss the theoretical foundations, dynamics, empirical status, and political economy of the natural rate hypothesis. They reflect the vigor with which we might expect both proponents and critics to discuss a concept of such central importance. Cross should be applauded for the breadth of his perspective on the natural rate. He has marshalled a wide variety of papers into a volume that is particularly good at highlighting recent advances and which, ultimately, no macroeconomist will want to be without." Mark Setterfield, Eastern Economic Journal