Mr Phelps began writing groundbreaking models of the labour market in 1966.
A year later, Friedman gave what became the canonical criticism of the old way of thinking in an address to the American Economics Association.
In it, he argued that, far from there being a menu of options for policymakers to pick from, one rate of unemployment—a natural rate—would eventually prevail.
Suppose, Friedman reasoned, that a central bank prints money in an attempt to push unemployment lower than the natural rate.
A larger money supply would lead to more spending.
Firms would respond to increased demand for their products by expanding production and raising prices, say by 5%.
This inflation would catch workers by surprise.
Their wages would be worth less than they bargained for when they had negotiated their contracts.
Labour would, for a while, be artificially cheap, encouraging hiring.
Unemployment would fall below the natural rate.
The central bank would achieve its goal.
The next time pay was negotiated, however, workers would demand a 5% raise to restore their standard of living.
Neither firm nor worker has gained or lost negotiating power since the last time real wages were set, so the natural rate of unemployment would reassert itself as firms shed staff to pay for the raise.
To get unemployment back down again, the central bank could embark on another round of easing.
But workers can be fooled only for so long.
They would come to expect 5% inflation, and would insist on commensurately higher wages in advance, rather than playing catch-up with the central bank.
Without an inflation surprise, there would be no period of unexpectedly cheap labour.
So unemployment would not fall.