During the sixties a cornerstone of economic policy was that permanent inflation results in high levels of economic activity. This was based in large part on the observation that prices and output, when measured as deviations from trend, are highly correlated-that is, the Phillips curve. Phelps and others showed that this apparent trade-off could not be explained in modern theoretical terms except possibly as a monetary and transient phenomenon. Inevitably, such an analysis implied a natural rate of unemployment or employment. The path-breaking book, The New Microeconomics in Employment Theory (New York: W. W. Norton & Co., 1970), by Edmund S. Phelps et al., contains most of these studies. In the first part of the book under review (Edmund S. Phelps, Inflation Policy and Unemployment Theory: The Cost Benefit Approach to Monetary Planning [London: Macmillan Co., 1972]), these and related developments in unemployment theory are synthesized and presented in a lucid and elegant manner. I recommend this book to all economists interested in understanding the new theory. Within the framework of modern unemployment theory, each of the three basic definitions employed treats unemployment as a private investment: (1) Search unemployment is a sacrifice of present wage earnings in return for the expectations of an improvement in future earnings. (2) Precautionary unemployment is an act of waiting in order to be available for better use later. (3) In the neoclassical speculative labor supply model, unemployment is an intended intertemporal trade of present leisure for an expected improvement in leisure cost of future consumption and future leisure. To this list I would add layoff unemployThe author thanks Robert E. Lucas, Jr., and Edmund S. Phelps for commenting on