The initial association of the natural-rate theory and conservative ideas on policy was exaggerated in another way.
As a result, by degrees, natural-rate theory has been recaptured by the centre-left.
In theory the natural rate will tend towards the expected nominal growth rate of the economy, so you want to keep that at zero.
That's the theory, at any rate, and history suggests that it is well founded.
There is no economic theory under which tax rate cuts cause recessions.
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In other words, the theory is that when the rate at which goods are shipped globally increases, so does economic growth.
One theory is that the exchange-rate movements were so abrupt because currency dealers find it hard to raise credit, just like everyone else, and that this has cut the volume of transactions.
Yet even if Lord Layard's theory is right, his figure for the optimal tax rate looks like little more than convenient guesswork.
The quantity theory of money holds that the money supply, multiplied by the rate at which it circulates (called velocity), equals nominal income.
The latest theory to gain sway: We don't want our unemployment rate kept down by an exodus of population, so we must stop that tide, too.
In theory, the resulting efficiencies should mean that Germany could raise its poor average rate of return on invested capital.
In which a small number of elders hold the power to rate performers of their arcane craft, trained as they have been in various schools of theory and practice.
In theory, the prices of various securities should have converged around a general market interest rate.
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In theory, this would allow the computer to perform many different computations simultaneously at a much quicker rate than conventional computers.
Theory and practice both tell us that printing money cannot generate economic growth or lower the natural rate of unemployment, but it can cause inflation.
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But anticipating more recent work, Mr Phelps, the theory's other pioneer, has long emphasised the need for measures to lower the natural rate--essentially, by making more people employable at the prevailing level of wages.
In the long run, theory suggests that higher growth, other things equal, should mean higher interest rates for a given rate of inflation.
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