And, under this theory, one outcome of this system—higher corporate profit margins—would likely give firms greater scope to increase wages without increasing prices, thus offering a potential explanation for the flattening of the Phillips curve, the traditional macroeconomic relationship between the unemployment rate and inflation.
For a policymaker who accepted this theory, his comfort in maintaining a very low rate of unemployment could depend significantly on his understanding of that underlying legal system and his estimation of how its evolution would likely proceed in the future.