Edmund S. Phelps won the 2006 Nobel Memorial Prize in Economic Sciences for his analysis of intertemporal tradeoffs in macroeconomic policy.
Phelps studied how current economic policies affect future outcomes, especially the relationship among inflation, employment, wages, and expectations. His work showed why expectations and the structure of labor markets matter when governments try to stabilize an economy.
A major implication of his research is that there is no permanent, cost-free tradeoff between inflation and unemployment. Attempts to keep unemployment below its sustainable level can eventually produce higher inflation rather than lasting employment gains.
Phelps was the sole economics laureate in 2006. His work is related to, but distinct from, the rational-expectations research associated with Robert Lucas and the real-business-cycle work associated with Finn Kydland and Edward Prescott.