This is what Steve Randy Waldman (SRW) wants us to believe, being highly praised by Steve Roth at Angry Bear who says that´s the point he didn´t ‘grab’ during 10 years researching the Great Inflation. From Steve Roth:
I’ve been worrying at the various Great-Inflation explanations for a decade, and I’ve never found them satisfying. Some seeming errors and contortions of economic logic aside, the imputed causes (OPEC?) have just never seemed big enough to bring about the massive economic effects we encountered.
This definitely does. Steve has added a (maybe the) crucial piece that allows me to understand
Maybe Germany at the time of unification is the most glaring example. In 1991 alone the labor force increased 24% through the absorption of the much less productive East German workers. The rise in NGDP in 1991 was 8.4%, above the average of 5.4% of the previous 10 years. During the following 10 years NGDP growth averaged only 3.2%.Inflation in the following 10 years averaged 2.4%, a bit below the average of 2.6% over the previous 10 years.
I bet Robert Hetzel, who 15 years ago wrote the ‘delicious’ “Arthur Burns and Inflation” does not agree at all with SRW´s ending:
Oh, and give poor Arthur Burns a break. You couldn’t have done any better.
A little over one year ago I posted “The Origins of the Great Inflation”. I didn´t see any place for demographics.