Applied Economics - the story of the Phillip's Curve

The accusation most often leveled against economics as a subject is that it is ex-post in nature, i.e. it explains things after they occur, and hence are of no practical and applied consequence to the world around us. For example, they say that while economists have in hindsight explained what caused the recession of 2008, they failed to prevent it. Hence, what is the point of economics as a subject?

This is something that many economists and economics students too agree to. However, while reading my second year macroeconomics textbook, I came across the Philip's curve. The Philip's curve, in its original form, was an empirical relationship between inflation and unemployment, which concluded that if a Government wants to reduce unemployment (which results in higher growth), then it has to live with a certain bit of inflation.

The 'discovery' of the Phillip's curve, first in the U.K by Phillips and then in the US by Solou, was used extensively by macroeconomists and eventually policy makers in the 1960s. This trade-off that was observed by the Phillip's curve was exploited by policy-makers to ensure that the 1960s were a period of unprecedented growth in the developed world (coupled with the apparent success of Keynesian economics, this was the golden period of Keynesian economics). Hence, to those who say that economics is an ex-post science, an entire decade of growth was sustained on the basis of what economists observed. Rather, not only observed empirically, but argued theoretically.

However, in the 1970s, the theory behind the Phillip's curve began to falter (basically, that people began to expect inflation). However, this break-down was also predicted by a group of economists led by the monetarist Milton Friedman. Hence, even here economics was an ex-ante science, rather than an ex-post science.

Hence, for all those who say that economics is a useless science with no practical applications, it is a fitting rejoinder that one entire decade of high growth (of the sort unseen in modern history) was because a bunch of economists thought of a trade-off and showed it empirically. Truly, the power of economics.