"The formula implies that the labor market is efficient when there are as many unemployed workers as vacant jobs (u = v); "
Seems totally arbitrary. "Efficiency" in the labor market would mean maximizing the value of labor shifting from lower wage to higher wage jobs (including from out of the LF to in the LF) at as low (search and time) cost as possible. I can imagine that u and v might be arguments in the maximization criterion, but doubt very much that the criterion IS u = v.
"One of the mandates of monetary policy is to maintain the economy at full employment—so to maintain unemployment at its efficient rate."
I think a better way of thinking about the Fed's Congressional mandate is that the Fed should maintain a res income-maximizing rate of inflation. Labor market efficiency would conceptually enter by affecting what inflation rate maximizes real income.
BTW, I agree with you that the Fed should be (since December) feeling out a lower EFFR.
Interesting looking course. I'd encourage you to think about tweaking it so not (implicitly) to depend on a one good, one input ("labor") model. It a multi-good, multi-input model, slack, u and v all become vectors not scalar variables.
"The formula implies that the labor market is efficient when there are as many unemployed workers as vacant jobs (u = v); "
Seems totally arbitrary. "Efficiency" in the labor market would mean maximizing the value of labor shifting from lower wage to higher wage jobs (including from out of the LF to in the LF) at as low (search and time) cost as possible. I can imagine that u and v might be arguments in the maximization criterion, but doubt very much that the criterion IS u = v.
"One of the mandates of monetary policy is to maintain the economy at full employment—so to maintain unemployment at its efficient rate."
I think a better way of thinking about the Fed's Congressional mandate is that the Fed should maintain a res income-maximizing rate of inflation. Labor market efficiency would conceptually enter by affecting what inflation rate maximizes real income.
BTW, I agree with you that the Fed should be (since December) feeling out a lower EFFR.
Interesting looking course. I'd encourage you to think about tweaking it so not (implicitly) to depend on a one good, one input ("labor") model. It a multi-good, multi-input model, slack, u and v all become vectors not scalar variables.