by Bombach
[Front Matter and Editorial Information]: Title page and publication details for a collection of essays dedicated to Erich Schneider on his 60th birthday. Lists prominent contributors including Johan Åkerman, Ragnar Frisch, Gottfried Haberler, and Jan Tinbergen. [Vorwort als Glückwunsch (Preface)]: Gottfried Bombach's preface honoring Erich Schneider's contributions to German economic theory. Bombach explains the choice of 'inflation' as the central theme, noting the influence of Carl Föhl and the absence of late contributors like Erik Lindahl and Hans Peter. He outlines the structure of the volume, which moves from institutional studies to theoretical analyses of growth and inflation. [Inhaltsübersicht (Table of Contents)]: Detailed table of contents listing all contributors and their specific essay titles, covering historical case studies (Germany, Belgium, Austria, Chile) and theoretical models of inflation and growth. [An Institutional Approach to the Problem of Inflation]: Johan Åkerman critiques traditional aggregative economic theories (Fisher, Wicksell, Keynes) for failing to account for the institutional and sociological drivers of inflation. He argues that inflation is not merely a conceptual imbalance but a result of the actions and power dynamics of specific social groups: the State (often fragmented), labor unions (driving wage-push), and entrepreneurs. Åkerman suggests that a rational anti-inflation policy requires the synchronization of these groups' actions and a move toward international wage stabilization. [A Chapter of the History of Monetary Theory and Policy]: Jørgen Pedersen analyzes the German monetary stabilization of 1923-1924. He argues that the 'stabilization of the Mark' was actually a stabilization of the Dollar rate achieved through extreme economic hardship, including high unemployment and high interest rates. Pedersen critiques the theoretical focus on gold cover and note issues, suggesting instead that a policy of direct wage control and full employment would have been a more rational and stable alternative for the Weimar Republic. [Economic Modeling of Employment and Wages in 1924 Germany]: The author develops a mathematical function for employment (N) in Germany during 1924, identifying it as a falling function of real labor costs and interest levels. The analysis explains how wage increases during this period led to balance of payment deficits and subsequent credit tightening by the Reichsbank to protect the currency. [Wage Dynamics and National Income (1925-1928)]: A detailed comparison of German economic indicators between 1925 and 1928, utilizing data from Hoffmann and Müller. The author argues that the significant rise in nominal wages outpaced world prices and interest rates, causing a severe depression in late 1925 and structural deficits that necessitated continuous foreign borrowing. [The Role of the Reichsbank and the 1929 Crisis]: This section examines the Reichsbank's credit policies and the impact of external shocks, specifically the US Federal Reserve's actions against stock speculation in 1928-29. It describes how Germany's dependence on foreign loans made it uniquely vulnerable to the global liquidity crisis, leading to the massive unemployment of 1930. [Conclusion: The Failure of Monetary Stabilization]: The author concludes that the German economic collapse was caused by fixing exchange rates (the Dollar rate) without controlling wages. He critiques contemporary economic theory for prioritizing gold convertibility over social stability and argues that a policy of wage stabilization would have prevented the political revolution. [The Problem of Responsibility and Global Deflation]: An analysis of the three major factors responsible for the German collapse: US deflationary policy in 1920, the Fed's 1928-29 crusade against speculation, and the 1923-24 Mark stabilization. The author discusses the 'doldrums' of the 1920s and how international credit shocks triggered the 1931 liquidity crisis. [Belgian Monetary Policy and Post-War Inflation]: Léon H. Dupriez analyzes Belgium's post-1944 monetary policy. Unlike its neighbors, Belgium pursued a deflationary path and rapid wage normalization, which forced industrial rationalization and high productivity. The text explores how this 'classic' approach created trade surpluses and prepared Belgium for the Common Market. [Inflation and Stabilization in Austria since 1945]: Wilhelm Weber and Karl Socher examine the Austrian post-war inflation (1945-1952). They highlight the unique 'Price-Wage Agreements' (Preis-Lohn-Abkommen) negotiated between social partners as a tool for 'steered' inflation. The section details the transition from black market dominance to official price stabilization by 1952. [Direct Price Controls in Post-War Austria]: This section examines the use of direct price controls and official maximum prices in the immediate post-war period. It explains how price authorities attempted to maintain pre-war price-wage ratios despite a significant drop in productivity, which ultimately forced the authorities to approve price increases based on rising production costs. [Fiscal Policy and Reconstruction Financing (1945–1951)]: An analysis of Austrian fiscal policy between 1945 and 1951, focusing on the challenges of financing occupation costs and reconstruction. The author argues that while fiscal policy was not a primary tool for fighting inflation, it avoided major inflationary effects after 1946, eventually reaching a balanced budget by 1951 through tax increases and American ERP aid. [Monetary and Credit Policy: From Currency Reform to Credit Restriction]: This segment details the various attempts to curb inflation through monetary measures, including the Currency Protection Act of 1947 and subsequent credit restrictions. It discusses the role of commercial credit expansion as a driver of money creation and the impact of the increasing velocity of money on demand during the 1948–1951 period. [The Stabilization of 1951/52: Causes and Consequences]: The author explores the socio-economic impacts of inflation and the factors leading to the 1951/52 stabilization. It argues that the negative effects on saving and productivity eventually outweighed the perceived benefits of inflation-led growth, and that external factors like the reduction of ERP aid and the end of the Korean War boom facilitated the shift toward stability. [Technical Implementation and the Stabilization Crisis]: This section describes the technical execution of stabilization through voluntary price reductions, wage stops, and subsequent monetary tightening. It analyzes the 'stabilization crisis' of late 1952, characterized by stagnation and rising unemployment, and debates whether this recession was a necessary prerequisite for changing economic expectations or an avoidable policy error. [Creeping Inflation Since 1953]: An analysis of the 'creeping' inflation that occurred after 1953. The author distinguishes between demand-pull inflation during booms and cost-push inflation during slowdowns, noting the role of trade unions and oligopolistic pricing. It also evaluates the limited effectiveness of fiscal and monetary policies in combating these price increases during the mid-to-late 1950s. [The Joint Commission for Prices and Wages]: This section details the establishment and function of the Parity Commission (Paritätische Kommission) in 1957. It discusses the commission's role in managing price and wage demands through social partnership, its psychological impact on inflation expectations, and the debate among economists regarding its long-term effectiveness versus its potential to act as a catalyst for monopolistic price adjustments. [Schlußfolgerungen: Die Inflation in Österreich nach dem Krieg]: This concluding section analyzes the two distinct periods of inflation in post-WWII Austria: the classical demand-pull inflation (1945-1951) and the subsequent 'creeping' inflation starting in 1953. It evaluates the effectiveness of the specifically Austrian Price-Wage Commission and the role of monetary and fiscal policy in a small, trade-dependent economy with fixed exchange rates. [Vers une «économie fine»]: Jacques Rueff discusses the transition of the French economy from an inflation-driven expansion to a regime of stability and competition within the Common Market. He argues that the end of inflation necessitates a shift toward an 'économie fine' (fine-tuned economy) where technical perfection, low production costs, and organizational efficiency are decisive for survival against foreign competition, particularly from Germany. [Geldinflation, Nachfrageinflation, Kosteninflation: Eine systematische Analyse]: Gottfried Haberler provides a systematic analysis of the causal mechanisms of inflation, distinguishing between demand-pull and cost-push (specifically wage-push) factors. He asserts that no serious long-term inflation can exist without an expansion of the money supply. The text explores the role of labor unions as monopolies that can force wages above productivity growth, creating a dilemma between price stability and unemployment. Haberler also critiques the theory of 'administered prices' by industrial monopolies, arguing they cause one-time price increases rather than continuous inflationary pressure. [Widerspruchsvolle Erklärungsversuche für die Inflation in den Vereinigten Staaten (1955–1958)]: Haberler reviews conflicting explanations for the US inflation of 1955-1958. He contrasts 'demand-pull' theorists like Hansen, Burns, and Selden (who emphasize investment booms and monetary factors) with 'cost-push' or 'administered price' theorists like Means and Galbraith. Haberler critiques the 'administered price' thesis, arguing that price increases in concentrated industries were actually driven by concentrated demand in the investment sector and wage-push from powerful unions, rather than arbitrary monopoly power. [The Infra Effect of Investments]: Opening of a section by Ragnar Frisch regarding the 'infra effect' of investments. [The Infra Effect of Investments]: Ragnar Frisch introduces the concept of the 'infra effect' of investment, which refers to the change in current account input coefficients in a given sector, as opposed to the 'capacity effect' which increases sector capacity. He provides a mathematical framework for calculating the infra corrected inverse of an input-output matrix when one row is modulated by investment. [The National Product and its Maximization]: Frisch discusses the formal maximization of the national product, defining it as the maximization of net gain (residual input) under a given primary factor input (labour). He outlines a step-by-step algorithmic procedure for finding the optimal solution when sector products are bounded and profitability varies across sectors. [Comparing Structures and Measuring the Infra Effect]: This section explores how to compare different economic structures to measure the gain (infra effect) of moving from one to another. Frisch argues for a project-based model over aggregated channel models and provides a simplified practical formula for measuring the infra effect of a project based on the modulation of input coefficients. [Economic Models for the Explanation of Inflation]: Jan Tinbergen analyzes the causes of inflation through economic models, distinguishing between policy parameters and non-controllable data. He critiques the standard demand equation for money and argues that the most powerful instrument of monetary policy is direct or indirect credit restriction rather than interest rate manipulation. [Speculative Attitudes and the Causal Nexus of Inflation]: Tinbergen discusses 'push' and 'pull' inflation, noting that high inflation often eliminates 'money illusion' as the public becomes aware of real value. He suggests that the rate of inflation is driven by 'speculative terms'—reactions to previous price increases—and provides simplified mathematical examples showing how these terms can lead to different inflationary outcomes. [Über die Wirkung der Zinspolitik auf die Güterpreise: Die klassische These]: Jürgen Niehans re-examines the classical thesis that lowering interest rates leads to higher prices in a full-employment economy. He introduces Thomas Tooke's counter-argument that lower interest rates reduce production costs and could thus lower prices, acting as an 'advocatus diaboli' to challenge the prevailing consensus in economic theory. [The Three Phases of Interest Rate Reduction: Tooke vs. Classical Theory]: Analyzes the short and medium-term effects of interest rate reductions on production and prices. It contrasts Thomas Tooke's view (lower interest leads to lower costs/prices) with classical theory, arguing that while Tooke is right about cost reduction, he neglects the stronger inflationary stimulus of increased investment demand in the second phase. [Comparison of Interest Rate and Wage Reductions]: Distinguishes between the price effects of interest rate cuts versus wage cuts. It argues that wage cuts are more likely to lower prices in a full-employment economy because labor is a direct production factor and lacks the asset-restructuring investment stimulus inherent in interest rate changes. [The Long-term Phase: Supply Effects and Capital Accumulation]: Explores the third, long-term phase of interest rate reduction where additional capital goods begin to provide services (e.g., housing, energy), increasing total supply. The author notes that neither Tooke nor the classical theorists fully analyzed whether this supply increase could eventually overcompensate for the initial demand-driven price rise. [The Capital Theory Approach: Forced Saving and Production]: Examines the concept of 'forced saving' (Zwangssparen) where interest rate cuts shift production toward capital goods at the expense of consumption. It discusses how classical thinkers like Mill, Hume, and Wicksell viewed the relationship between capital accumulation and the long-term price level, suggesting that increased productivity from higher capital stock could mitigate inflation. [Growth Theory and James Tobin's Contribution]: Evaluates modern growth theory's ability to solve the interest-price problem. It highlights James Tobin's model as a significant advancement because it incorporates production elasticities and liquidity functions, though it notes limitations regarding the lack of a banking system and diverse asset types in early versions. [Unclassical Conclusions: Temporary vs. Permanent Interest Rate Cuts]: Begins the second part of the essay by arguing that classical premises can lead to 'unclassical' conclusions: specifically, that long-term price falls are possible following interest rate cuts. It analyzes the case of a temporary rate cut, arguing that the resulting excess capital stock eventually forces prices back down to original levels through a contraction process. [Modeling the Permanent Interest Rate Reduction]: Presents a mathematical model to demonstrate how a permanent interest rate reduction can lead to lower long-term prices. By increasing the capital stock and thus the growth rate of real social product, the supply-side effect can eventually overtake the initial nominal expansion, resulting in a price level lower than if the interest rate had remained high. [Der Fall einer fortschreitenden Zinssenkung]: Bombach examines whether a continuous reduction in interest rates necessarily leads to permanent inflation. Using a mathematical model and diagrams, he argues that while prices may initially rise, the resulting increase in capital stock and productivity can eventually lead to lower prices compared to a scenario with stable interest rates, challenging the 'classical' view that cheap money always causes long-term inflation. [Geldwertstabilisierung bei Vollbeschäftigung]: Carl Föhl analyzes monetary stability through the lens of circular flow theory (Kreislauftheorie). He argues that while cyclical overheating causes inflation, a deeper 'distributional component' exists where unions seek higher nominal wages to increase their share of the social product. He contends that nominal wage increases exceeding productivity gains inevitably lead to price increases, and suggests that true stability requires shifting distributional goals from wage policy to tax policy and capital formation for workers. [On Some Factors Causing Inflation]: G. Ugo Papi explores causes of inflation beyond simple demand-pull factors, focusing on the role of government finance and public expenditure. He distinguishes between real and monetary national income, explaining how extraordinary finance (drawing on savings/capital) and 'specific' inflation (money creation) create a gap between the two. He also discusses how heavy taxation and unproductive public expenditure can raise costs and discourage investment, leading to price increases independent of money supply changes. [Public Expenditure, Taxation, and Inflationary Pressure]: The author argues that public expenditure often fails to compensate for the contractionary effects of taxation. He posits that heavy taxation and large public spending create inflationary pressures, restrict saving, and equalize incomes to the detriment of capital formation. The text distinguishes between 'demand inflation' during disbursement and 'cost inflation' later as productive activity is affected. [Government Intervention, Protectionism, and Market Organization]: This section examines how government interventions, such as trade barriers and agricultural price supports, lead to price increases and economic inefficiencies. The author details various methods of supporting farmer incomes (subsidies, government purchases, production restrictions) and explains how these lead to surpluses, export subsidies, and retaliatory tariffs, ultimately contracting international trade. [Productivity as the Basis for Real Income Growth]: The author critiques the illusion that artificial price supports or subsidies can durably raise incomes. He asserts that only increased productivity can translate into additional real income. He concludes that government intervention must be inspired by economic criteria; otherwise, cost and demand inflation will combine to exert upward pressure on the general price level. [Inflation in Dynamic Theory by Roy Harrod]: Roy Harrod applies dynamic theory to the problem of inflation, contrasting it with static Keynesian analysis. He discusses the 'natural rate of growth' (Gn) and the 'natural rate of interest' (rn) required for a welfare optimum. Harrod explores how the propensity to save, often influenced by institutional arrangements and time preference, may be deficient, thereby impeding growth even if the shortage is not immediately felt due to low demand. [Dynamic Equations and the Impact of Inflation on Amortization]: Harrod presents mathematical equations for the natural rate of interest and growth. He provides a detailed critique of inflationary finance, arguing that the loss of saving due to deficient amortization (based on historic rather than replacement costs) typically outweighs the gains from 'forced saving'. He concludes that while inflation might temporarily boost investment (e.g., during a 'take-off' phase), it is generally inimical to long-term growth. [Inflation and Growth by Alvin H. Hansen]: Alvin Hansen discusses the slowing growth rate in the US, attributing it to an exaggerated fear of inflation. He argues that US inflation is typically caused by investment spurts rather than general demand. For advanced countries, he recommends stabilizing the investment cycle through tax adjustments and low interest rates. Conversely, for underdeveloped countries, he suggests that a judicious degree of inflation and central bank credit may be necessary to generate forced saving for development. [Ursachen der Nachkriegsinflation (Gottfried Bombach)]: Bombach analyzes the causes of post-war inflation, questioning the definition of price stability and the metrics used to measure it (CPI vs. GNP deflator). He introduces the concepts of cost-push and demand-pull inflation, 'ratchet effects', and 'administered prices'. He critiques the term 'creeping inflation' as a value-laden concept and argues that a slight upward trend in prices is not a necessary condition for economic growth. [The Relationship Between Growth Rates and Price Trends]: Bombach argues that there is no proven positive correlation between the growth rate of the social product and the rate of price increases. He critiques the simplistic distinction between cost-push and demand-pull inflation, noting that in practice, they are often indistinguishable. He discusses the role of autonomous wage formation in imperfect markets and the difficulty of using productivity-linked wages as a stabilization tool. [International Dimensions of Inflation and Exchange Rates]: Bombach explores the conflict between internal price stability and international balance of payments, specifically regarding Germany's export surpluses. He outlines three paths: maintaining stable prices with fixed exchange rates (leading to surpluses), currency revaluation, or following international inflation trends. He advocates for international coordination of economic policy within the EEC rather than following the 'inflationary example' of other nations. [Built-In Flexibility and Economic Growth: Introduction and Macro-Static Case]: Alan T. Peacock introduces the concept of built-in flexibility in fiscal policy, contrasting the 'rules versus authority' debate in social philosophy. He outlines the standard macro-static Keynesian analysis where tax yields act as automatic offsets to income changes but fail to restore initial equilibrium. The section establishes the groundwork for investigating how these conclusions change when moving from a static model to a growing economy of the Harrod-Domar type. [Built-In Flexibility in a Dynamic Setting: Model Construction]: Peacock develops a dynamic model to test built-in flexibility in a growing economy. He distinguishes between 'growth requirements' (full utilization of resources) and 'growth tendencies' (actual path). Unlike static models, he defines the 'no flexibility' case as one where government spending and taxes grow proportionally with income, while flexibility is represented by a progressive tax structure where the tax coefficient is a function of the rate of income change. [Analysis of Investment and Government Spending Coefficients]: The author analyzes the effects of autonomous changes in investment (k) and government spending (g) coefficients within a dynamic framework. He demonstrates through numerical examples that a progressive tax system in a growing economy can cause the actual income path to 'overshoot' the equilibrium growth path. This contradicts macro-static findings, showing that built-in flexibility can be more potent than expected and that the results vary depending on whether the initial change was in investment or government expenditure. [Concluding Remarks on Macro-Dynamic Growth Models]: The author concludes the discussion on macro-dynamic growth models by emphasizing that institutional and behavioral assumptions, such as corporate business organization and tax-dependent investment, can significantly modify theoretical results. At the policy level, the analysis supports authoritarian changes in tax rates for stabilization, while noting the practical difficulties of timing and political demands for immediate action in a democracy. [Finanzpolitische Maßnahmen zur Inflationsverhinderung]: Heinz Haller examines the role of fiscal policy in preventing inflation, noting that while Keynesian theory initially focused on unemployment, it is equally applicable to demand restriction. He discusses the psychological and political barriers to achieving budget surpluses, the limitations of central bank monetary policy in an era of currency convertibility and trade surpluses, and the specific challenges faced by the West German Federal Ministry of Finance in coordinating anti-cyclical policy. [Methoden der fiskalischen Kontraktion und Überschussbildung]: Haller analyzes various methods for achieving a contractionary fiscal effect. He compares budget cuts with tax increases, noting that expenditure reduction is often more effective but politically difficult. He explores 'behelfsmethoden' (auxiliary methods) such as forced loans (Zwangsanleihe), voluntary loans, and tax-privileged 'iron savings' to sterilize purchasing power without permanent tax increases. He also addresses the structural difficulties of fiscal coordination in federal systems like West Germany. [The Problem of Inflation in Developing Countries: Chile, A Case Study]: Börje Kragh provides a comprehensive historical and structural analysis of inflation in Chile from the late 19th century through the 1950s. He argues that Chile's inflation is driven by structural rigidities, particularly the stagnation of the agricultural sector (the latifundio system) and a highly vulnerable import capacity tied to copper. He examines the failure of monetary and fiscal stabilization efforts in the mid-1950s, showing how they led to industrial stagnation and regressive income redistribution without fully halting price increases. [Autorenregister (Author Index)]: An alphabetical index of authors cited throughout the volume 'Stabile Preise in wachsender Wirtschaft', including major figures such as Keynes, Wicksell, Alvin Hansen, and Schumpeter.
Title page and publication details for a collection of essays dedicated to Erich Schneider on his 60th birthday. Lists prominent contributors including Johan Åkerman, Ragnar Frisch, Gottfried Haberler, and Jan Tinbergen.
Read full textGottfried Bombach's preface honoring Erich Schneider's contributions to German economic theory. Bombach explains the choice of 'inflation' as the central theme, noting the influence of Carl Föhl and the absence of late contributors like Erik Lindahl and Hans Peter. He outlines the structure of the volume, which moves from institutional studies to theoretical analyses of growth and inflation.
Read full textDetailed table of contents listing all contributors and their specific essay titles, covering historical case studies (Germany, Belgium, Austria, Chile) and theoretical models of inflation and growth.
Read full textJohan Åkerman critiques traditional aggregative economic theories (Fisher, Wicksell, Keynes) for failing to account for the institutional and sociological drivers of inflation. He argues that inflation is not merely a conceptual imbalance but a result of the actions and power dynamics of specific social groups: the State (often fragmented), labor unions (driving wage-push), and entrepreneurs. Åkerman suggests that a rational anti-inflation policy requires the synchronization of these groups' actions and a move toward international wage stabilization.
Read full textJørgen Pedersen analyzes the German monetary stabilization of 1923-1924. He argues that the 'stabilization of the Mark' was actually a stabilization of the Dollar rate achieved through extreme economic hardship, including high unemployment and high interest rates. Pedersen critiques the theoretical focus on gold cover and note issues, suggesting instead that a policy of direct wage control and full employment would have been a more rational and stable alternative for the Weimar Republic.
Read full textThe author develops a mathematical function for employment (N) in Germany during 1924, identifying it as a falling function of real labor costs and interest levels. The analysis explains how wage increases during this period led to balance of payment deficits and subsequent credit tightening by the Reichsbank to protect the currency.
Read full textA detailed comparison of German economic indicators between 1925 and 1928, utilizing data from Hoffmann and Müller. The author argues that the significant rise in nominal wages outpaced world prices and interest rates, causing a severe depression in late 1925 and structural deficits that necessitated continuous foreign borrowing.
Read full textThis section examines the Reichsbank's credit policies and the impact of external shocks, specifically the US Federal Reserve's actions against stock speculation in 1928-29. It describes how Germany's dependence on foreign loans made it uniquely vulnerable to the global liquidity crisis, leading to the massive unemployment of 1930.
Read full textThe author concludes that the German economic collapse was caused by fixing exchange rates (the Dollar rate) without controlling wages. He critiques contemporary economic theory for prioritizing gold convertibility over social stability and argues that a policy of wage stabilization would have prevented the political revolution.
Read full textAn analysis of the three major factors responsible for the German collapse: US deflationary policy in 1920, the Fed's 1928-29 crusade against speculation, and the 1923-24 Mark stabilization. The author discusses the 'doldrums' of the 1920s and how international credit shocks triggered the 1931 liquidity crisis.
Read full textLéon H. Dupriez analyzes Belgium's post-1944 monetary policy. Unlike its neighbors, Belgium pursued a deflationary path and rapid wage normalization, which forced industrial rationalization and high productivity. The text explores how this 'classic' approach created trade surpluses and prepared Belgium for the Common Market.
Read full textWilhelm Weber and Karl Socher examine the Austrian post-war inflation (1945-1952). They highlight the unique 'Price-Wage Agreements' (Preis-Lohn-Abkommen) negotiated between social partners as a tool for 'steered' inflation. The section details the transition from black market dominance to official price stabilization by 1952.
Read full textThis section examines the use of direct price controls and official maximum prices in the immediate post-war period. It explains how price authorities attempted to maintain pre-war price-wage ratios despite a significant drop in productivity, which ultimately forced the authorities to approve price increases based on rising production costs.
Read full textAn analysis of Austrian fiscal policy between 1945 and 1951, focusing on the challenges of financing occupation costs and reconstruction. The author argues that while fiscal policy was not a primary tool for fighting inflation, it avoided major inflationary effects after 1946, eventually reaching a balanced budget by 1951 through tax increases and American ERP aid.
Read full textThis segment details the various attempts to curb inflation through monetary measures, including the Currency Protection Act of 1947 and subsequent credit restrictions. It discusses the role of commercial credit expansion as a driver of money creation and the impact of the increasing velocity of money on demand during the 1948–1951 period.
Read full textThe author explores the socio-economic impacts of inflation and the factors leading to the 1951/52 stabilization. It argues that the negative effects on saving and productivity eventually outweighed the perceived benefits of inflation-led growth, and that external factors like the reduction of ERP aid and the end of the Korean War boom facilitated the shift toward stability.
Read full textThis section describes the technical execution of stabilization through voluntary price reductions, wage stops, and subsequent monetary tightening. It analyzes the 'stabilization crisis' of late 1952, characterized by stagnation and rising unemployment, and debates whether this recession was a necessary prerequisite for changing economic expectations or an avoidable policy error.
Read full textAn analysis of the 'creeping' inflation that occurred after 1953. The author distinguishes between demand-pull inflation during booms and cost-push inflation during slowdowns, noting the role of trade unions and oligopolistic pricing. It also evaluates the limited effectiveness of fiscal and monetary policies in combating these price increases during the mid-to-late 1950s.
Read full textThis section details the establishment and function of the Parity Commission (Paritätische Kommission) in 1957. It discusses the commission's role in managing price and wage demands through social partnership, its psychological impact on inflation expectations, and the debate among economists regarding its long-term effectiveness versus its potential to act as a catalyst for monopolistic price adjustments.
Read full textThis concluding section analyzes the two distinct periods of inflation in post-WWII Austria: the classical demand-pull inflation (1945-1951) and the subsequent 'creeping' inflation starting in 1953. It evaluates the effectiveness of the specifically Austrian Price-Wage Commission and the role of monetary and fiscal policy in a small, trade-dependent economy with fixed exchange rates.
Read full textJacques Rueff discusses the transition of the French economy from an inflation-driven expansion to a regime of stability and competition within the Common Market. He argues that the end of inflation necessitates a shift toward an 'économie fine' (fine-tuned economy) where technical perfection, low production costs, and organizational efficiency are decisive for survival against foreign competition, particularly from Germany.
Read full textGottfried Haberler provides a systematic analysis of the causal mechanisms of inflation, distinguishing between demand-pull and cost-push (specifically wage-push) factors. He asserts that no serious long-term inflation can exist without an expansion of the money supply. The text explores the role of labor unions as monopolies that can force wages above productivity growth, creating a dilemma between price stability and unemployment. Haberler also critiques the theory of 'administered prices' by industrial monopolies, arguing they cause one-time price increases rather than continuous inflationary pressure.
Read full textHaberler reviews conflicting explanations for the US inflation of 1955-1958. He contrasts 'demand-pull' theorists like Hansen, Burns, and Selden (who emphasize investment booms and monetary factors) with 'cost-push' or 'administered price' theorists like Means and Galbraith. Haberler critiques the 'administered price' thesis, arguing that price increases in concentrated industries were actually driven by concentrated demand in the investment sector and wage-push from powerful unions, rather than arbitrary monopoly power.
Read full textOpening of a section by Ragnar Frisch regarding the 'infra effect' of investments.
Read full textRagnar Frisch introduces the concept of the 'infra effect' of investment, which refers to the change in current account input coefficients in a given sector, as opposed to the 'capacity effect' which increases sector capacity. He provides a mathematical framework for calculating the infra corrected inverse of an input-output matrix when one row is modulated by investment.
Read full textFrisch discusses the formal maximization of the national product, defining it as the maximization of net gain (residual input) under a given primary factor input (labour). He outlines a step-by-step algorithmic procedure for finding the optimal solution when sector products are bounded and profitability varies across sectors.
Read full textThis section explores how to compare different economic structures to measure the gain (infra effect) of moving from one to another. Frisch argues for a project-based model over aggregated channel models and provides a simplified practical formula for measuring the infra effect of a project based on the modulation of input coefficients.
Read full textJan Tinbergen analyzes the causes of inflation through economic models, distinguishing between policy parameters and non-controllable data. He critiques the standard demand equation for money and argues that the most powerful instrument of monetary policy is direct or indirect credit restriction rather than interest rate manipulation.
Read full textTinbergen discusses 'push' and 'pull' inflation, noting that high inflation often eliminates 'money illusion' as the public becomes aware of real value. He suggests that the rate of inflation is driven by 'speculative terms'—reactions to previous price increases—and provides simplified mathematical examples showing how these terms can lead to different inflationary outcomes.
Read full textJürgen Niehans re-examines the classical thesis that lowering interest rates leads to higher prices in a full-employment economy. He introduces Thomas Tooke's counter-argument that lower interest rates reduce production costs and could thus lower prices, acting as an 'advocatus diaboli' to challenge the prevailing consensus in economic theory.
Read full textAnalyzes the short and medium-term effects of interest rate reductions on production and prices. It contrasts Thomas Tooke's view (lower interest leads to lower costs/prices) with classical theory, arguing that while Tooke is right about cost reduction, he neglects the stronger inflationary stimulus of increased investment demand in the second phase.
Read full textDistinguishes between the price effects of interest rate cuts versus wage cuts. It argues that wage cuts are more likely to lower prices in a full-employment economy because labor is a direct production factor and lacks the asset-restructuring investment stimulus inherent in interest rate changes.
Read full textExplores the third, long-term phase of interest rate reduction where additional capital goods begin to provide services (e.g., housing, energy), increasing total supply. The author notes that neither Tooke nor the classical theorists fully analyzed whether this supply increase could eventually overcompensate for the initial demand-driven price rise.
Read full textExamines the concept of 'forced saving' (Zwangssparen) where interest rate cuts shift production toward capital goods at the expense of consumption. It discusses how classical thinkers like Mill, Hume, and Wicksell viewed the relationship between capital accumulation and the long-term price level, suggesting that increased productivity from higher capital stock could mitigate inflation.
Read full textEvaluates modern growth theory's ability to solve the interest-price problem. It highlights James Tobin's model as a significant advancement because it incorporates production elasticities and liquidity functions, though it notes limitations regarding the lack of a banking system and diverse asset types in early versions.
Read full textBegins the second part of the essay by arguing that classical premises can lead to 'unclassical' conclusions: specifically, that long-term price falls are possible following interest rate cuts. It analyzes the case of a temporary rate cut, arguing that the resulting excess capital stock eventually forces prices back down to original levels through a contraction process.
Read full textPresents a mathematical model to demonstrate how a permanent interest rate reduction can lead to lower long-term prices. By increasing the capital stock and thus the growth rate of real social product, the supply-side effect can eventually overtake the initial nominal expansion, resulting in a price level lower than if the interest rate had remained high.
Read full textBombach examines whether a continuous reduction in interest rates necessarily leads to permanent inflation. Using a mathematical model and diagrams, he argues that while prices may initially rise, the resulting increase in capital stock and productivity can eventually lead to lower prices compared to a scenario with stable interest rates, challenging the 'classical' view that cheap money always causes long-term inflation.
Read full textCarl Föhl analyzes monetary stability through the lens of circular flow theory (Kreislauftheorie). He argues that while cyclical overheating causes inflation, a deeper 'distributional component' exists where unions seek higher nominal wages to increase their share of the social product. He contends that nominal wage increases exceeding productivity gains inevitably lead to price increases, and suggests that true stability requires shifting distributional goals from wage policy to tax policy and capital formation for workers.
Read full textG. Ugo Papi explores causes of inflation beyond simple demand-pull factors, focusing on the role of government finance and public expenditure. He distinguishes between real and monetary national income, explaining how extraordinary finance (drawing on savings/capital) and 'specific' inflation (money creation) create a gap between the two. He also discusses how heavy taxation and unproductive public expenditure can raise costs and discourage investment, leading to price increases independent of money supply changes.
Read full textThe author argues that public expenditure often fails to compensate for the contractionary effects of taxation. He posits that heavy taxation and large public spending create inflationary pressures, restrict saving, and equalize incomes to the detriment of capital formation. The text distinguishes between 'demand inflation' during disbursement and 'cost inflation' later as productive activity is affected.
Read full textThis section examines how government interventions, such as trade barriers and agricultural price supports, lead to price increases and economic inefficiencies. The author details various methods of supporting farmer incomes (subsidies, government purchases, production restrictions) and explains how these lead to surpluses, export subsidies, and retaliatory tariffs, ultimately contracting international trade.
Read full textThe author critiques the illusion that artificial price supports or subsidies can durably raise incomes. He asserts that only increased productivity can translate into additional real income. He concludes that government intervention must be inspired by economic criteria; otherwise, cost and demand inflation will combine to exert upward pressure on the general price level.
Read full textRoy Harrod applies dynamic theory to the problem of inflation, contrasting it with static Keynesian analysis. He discusses the 'natural rate of growth' (Gn) and the 'natural rate of interest' (rn) required for a welfare optimum. Harrod explores how the propensity to save, often influenced by institutional arrangements and time preference, may be deficient, thereby impeding growth even if the shortage is not immediately felt due to low demand.
Read full textHarrod presents mathematical equations for the natural rate of interest and growth. He provides a detailed critique of inflationary finance, arguing that the loss of saving due to deficient amortization (based on historic rather than replacement costs) typically outweighs the gains from 'forced saving'. He concludes that while inflation might temporarily boost investment (e.g., during a 'take-off' phase), it is generally inimical to long-term growth.
Read full textAlvin Hansen discusses the slowing growth rate in the US, attributing it to an exaggerated fear of inflation. He argues that US inflation is typically caused by investment spurts rather than general demand. For advanced countries, he recommends stabilizing the investment cycle through tax adjustments and low interest rates. Conversely, for underdeveloped countries, he suggests that a judicious degree of inflation and central bank credit may be necessary to generate forced saving for development.
Read full textBombach analyzes the causes of post-war inflation, questioning the definition of price stability and the metrics used to measure it (CPI vs. GNP deflator). He introduces the concepts of cost-push and demand-pull inflation, 'ratchet effects', and 'administered prices'. He critiques the term 'creeping inflation' as a value-laden concept and argues that a slight upward trend in prices is not a necessary condition for economic growth.
Read full textBombach argues that there is no proven positive correlation between the growth rate of the social product and the rate of price increases. He critiques the simplistic distinction between cost-push and demand-pull inflation, noting that in practice, they are often indistinguishable. He discusses the role of autonomous wage formation in imperfect markets and the difficulty of using productivity-linked wages as a stabilization tool.
Read full textBombach explores the conflict between internal price stability and international balance of payments, specifically regarding Germany's export surpluses. He outlines three paths: maintaining stable prices with fixed exchange rates (leading to surpluses), currency revaluation, or following international inflation trends. He advocates for international coordination of economic policy within the EEC rather than following the 'inflationary example' of other nations.
Read full textAlan T. Peacock introduces the concept of built-in flexibility in fiscal policy, contrasting the 'rules versus authority' debate in social philosophy. He outlines the standard macro-static Keynesian analysis where tax yields act as automatic offsets to income changes but fail to restore initial equilibrium. The section establishes the groundwork for investigating how these conclusions change when moving from a static model to a growing economy of the Harrod-Domar type.
Read full textPeacock develops a dynamic model to test built-in flexibility in a growing economy. He distinguishes between 'growth requirements' (full utilization of resources) and 'growth tendencies' (actual path). Unlike static models, he defines the 'no flexibility' case as one where government spending and taxes grow proportionally with income, while flexibility is represented by a progressive tax structure where the tax coefficient is a function of the rate of income change.
Read full textThe author analyzes the effects of autonomous changes in investment (k) and government spending (g) coefficients within a dynamic framework. He demonstrates through numerical examples that a progressive tax system in a growing economy can cause the actual income path to 'overshoot' the equilibrium growth path. This contradicts macro-static findings, showing that built-in flexibility can be more potent than expected and that the results vary depending on whether the initial change was in investment or government expenditure.
Read full textThe author concludes the discussion on macro-dynamic growth models by emphasizing that institutional and behavioral assumptions, such as corporate business organization and tax-dependent investment, can significantly modify theoretical results. At the policy level, the analysis supports authoritarian changes in tax rates for stabilization, while noting the practical difficulties of timing and political demands for immediate action in a democracy.
Read full textHeinz Haller examines the role of fiscal policy in preventing inflation, noting that while Keynesian theory initially focused on unemployment, it is equally applicable to demand restriction. He discusses the psychological and political barriers to achieving budget surpluses, the limitations of central bank monetary policy in an era of currency convertibility and trade surpluses, and the specific challenges faced by the West German Federal Ministry of Finance in coordinating anti-cyclical policy.
Read full textHaller analyzes various methods for achieving a contractionary fiscal effect. He compares budget cuts with tax increases, noting that expenditure reduction is often more effective but politically difficult. He explores 'behelfsmethoden' (auxiliary methods) such as forced loans (Zwangsanleihe), voluntary loans, and tax-privileged 'iron savings' to sterilize purchasing power without permanent tax increases. He also addresses the structural difficulties of fiscal coordination in federal systems like West Germany.
Read full textBörje Kragh provides a comprehensive historical and structural analysis of inflation in Chile from the late 19th century through the 1950s. He argues that Chile's inflation is driven by structural rigidities, particularly the stagnation of the agricultural sector (the latifundio system) and a highly vulnerable import capacity tied to copper. He examines the failure of monetary and fiscal stabilization efforts in the mid-1950s, showing how they led to industrial stagnation and regressive income redistribution without fully halting price increases.
Read full textAn alphabetical index of authors cited throughout the volume 'Stabile Preise in wachsender Wirtschaft', including major figures such as Keynes, Wicksell, Alvin Hansen, and Schumpeter.
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