Baffling Inflation: Cost-push Inflation Theories in the Late 1950s United States

Norikazu Takami

No 604, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The aim of this essay is to examine how cost-push inflation theories, which highlight autonomous increases of wages and other production costs as a cause of inflation, played their decisive role in the policy debate to interpret the price movements in the second half of the 1950s. In late 1956, economic experts including politicians and journalists as well as economists started to observe a peculiarity accompanying the ongoing inflation, namely, the apparent lack of excess aggregate demand, and they placed great emphasis on cost-push inflation theories to interpret this peculiar phenomenon. When the recession of 1958 entailed a steady increase of general prices, some experts considered this as another supporting evidence of cost push inflation. Against the background of this atypical inflation, the United States Congress, then ruled by the opposition Democratic party, engaged in large-scale inquiries of inflation. These investigations produced one report among others that emphasized cost-push theories, which was called the Eckstein Report after the technical director and Harvard economist Otto Eckstein. This essay concludes that the controversy on the inflation of the late 1950s created various processes that shaped and propagated cost-push inflation theories.

Pages: 27 pages
Date: 2014-04
New Economics Papers: this item is included in nep-his, nep-hpe and nep-mac
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