“The Relation Between Unemployment and the Rate of Change of Money Wages in hte United Kingdom, 1861-1957,” Economica, (London, November, 1958), p. 283.
“Employment, Inflation and Growth,” Economica (London, February 1962), p. 11.
A highly influential statement of this view was made by Professor Milton Friedman in his Presidential address to the American Economic Association in December 1967, see American Economic Review (March 1968).
The term “money illusion,” often used in connection with wage bargaining, reflects the idea that settlements are concluded in money terms. It is the illusion that the purchasing power of money will remain constant. A weakening of money illusion implies the increased tying of all kinds of contractual payments to the level of prices.