Friedman identiﬁed his “natural rate” as Walrasian equilibrium. Keynes’s “full employment” is also classical equilibrium: labor markets are clearing at existing real wages. Why is equilibrium unemployment not zero? Keynes and Friedman cite, but do not explain, “frictional” unemployment. They diﬀer on what explains cycles. Friedman and Lucas answer: misperceptions of inflation. Markets clear at wrong prices and quantities. Today New Classicals stress variations in the natural rate itself. In Keynesian cycles markets don’t clear.