October 20, 2017

“Cost-push” & “Cost-pull” theories of inflation

In the 1960s and 1970s, “cost-push” was the great explainer of inflation. On the pro side, a group of highly influential economists: Paul Samuelson – Nobel winner James Tobin – Nobel winner Walter Heller – CEA Chair Gardner Ackley – CEA Chair Arthur Okun – CEA Chair Arthur Burns – Fed Chair On the contra side, advocating monetary causes for inflation, an almost lone voice: Milton Friedman – Nobel winner Just one example from the “cost-push” side: As late as 1979, just as Paul Volcker was getting appointed Fed Chair and about to start a monetary experiment to curb inflation,…...

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