My latest essay.

Kuttner has apparently missed the point of the concept of a natural rate of unemployment, which is that the unemployment rate should not be a “target for monetary policy.” What Friedman means by the term natural unemployment rate is the rate toward which the economy will gravitate without any attempt at activist management by government. It is because the economy will settle on this natural rate that the Fed should not intervene to manipulate unemployment. If you are not intervening to manipulate the unemployment rate, then the accuracy of your measure of the natural rate of unemployment is irrelevant. Uncertainty about the level of the natural rate is a problem only for the opponents of Friedman, who are interventionists.

This essay refers to an article Kuttner wrote after his debate with Milton Friedman, about which I blogged here. If anything, Kuttner comes across less well solo than he did in the debate.