Macro level analysis of living systems such as economies have often used aggregated data to compile and quantify descriptors of trends and the variables presumed to determine them. However, systems aren't static in their variables, and the short-run sloping and long-run vertical Phillips curve illustrates how decision making in the aggregate changes over time. The economic system as a whole seems to learn what to do when their is a change in government policy.
For example, Nobel Economist Robert Lucas demonstrated that The Phillips Curve doesn't work in the long run. Others such as John Muth who originally formulated the hypothesis of rational expectations had also taken exception to notions of static variables and permanent descriptors of people's economic decision making that had been commonly used in macro economics.
In the late 1960s, there was considerable empirical support for the Phillips curve; it was regarded as one of the more stable relations in economics. It was interpreted as an option for government authorities to increase employment by pursuing an expansionary policy which raises inflation. Milton Friedman and Edmund Phelps criticized this interpretation and claimed that the expectations of the general public would adjust to higher inflation and preclude a lasting increase in employment: Only the short-run Phillips curve is sloping, whereas the long-run curve is vertical. This criticism was not quite convincing, however, because Friedman and Phelps assumed adaptive expectations. Such expectations do in fact imply a permanent rise in employment if inflation is allowed to increase over time.
The conclusion seems to be that over time a macro system does figure out the long term consequences of policy changes and as a result, changes its decision-making in response to its emerging rational expectations of the future. With continued experiences, living systems, in effect, "learn" just as organizations, businesses, and people do as they adjust and fine tune their behavior to accommodate their improving view of the future.
Of course, if government policy is erratic and unpredictable, their can't be much learning nor can rational expectations of the future arise. Apparently, the erratic, frantic government activity during the Great Depression created uncertainty in the economic system that hampered rational decision-making necessary for recovery.
