The Success of Anti-Inflation Policies in the United States

Abstract

Fall of 1971 is not a timely moment to write a paper evaluating The Success of Anti-Inflation Policies in the United States. It should be written about this time next year when we have had a chance to see at least the initial results of President Nixon's new anti-inflation program which will be a unique chapter in our experience. As it is, perhaps this paper can serve as documentation of the need for such a program. We have just been through the biggest failure of conventional stabilization policy to control inflation in our history. By conventional stabilization policy I mean the use of aggregate fiscal and monetary policies to control the rate of expansion of aggregate demand. And in grading this period the biggest failure of conventional policy I am not making a political judgment but a judgment about conventional policies. I have no reason to think that results would have been any better if the same degree of economic slowdown had been engineered by Arthur Okun ant Hubert Humphrey than by Paul McCracken and Richard Nixon. Other important differences would no doubt have existed with policy-making in different hands. But it is fair to say that no economist or economic model would have, in 1969, predicted the rate of inflation we have had this year if the correct information about the economic slowdown-about real GNP growth and unemployment in the intervening period-had been available at the time of the forecast. This is just another way of saying that inflation in general is a complicated rather than a simple

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