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Inflation and Employment: Is There a Third Way?

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  • Wilkinson, Frank

Abstract

High post-war inflation precipitated a counter reformation in theory from Keynesianism and established the conventional wisdom that a level of unemployment existed at which prices stabilised. The policy application of this notion failed to improve economic performance and, although inflation fell, mass unemployment and poverty returned. The explanation for this from within the new orthodoxy was that demand and supply conditions in the labour market had changed and unemployability explained joblessness. A study of the trend in import prices suggests, however, that the fall in inflation can be more readily explained by falls in import prices and other changes, which redistributed resources from the periphery to the core. This suggests that monetary control works indirectly on inflation by lowering economic activity and by reducing the bargaining power of the relatively weak. The enormous economic and social costs of this suggest that institutional ways of controlling prices offer major benefits. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Wilkinson, Frank, 2000. "Inflation and Employment: Is There a Third Way?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 24(6), pages 643-670, November.
    • Handle: RePEc:oup:cambje:v:24:y:2000:i:6:p:643-70
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    Cited by:

    1. Matias Vernengo & Nathan Perry, 2018. "Exchange Rate Depreciation, Wage Resistance and Inflation in Argentina (1882–2009)," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(1), pages 125-144, February.
    2. Jill Rubery & Brendan Burchell & Simon Deakin & Suzanne J Konzelmann, 2022. "A Tribute to Frank Wilkinson," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(3), pages 429-445.
    3. Claudio Sardoni, 2011. "Incomes policies: Two approaches," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 147-163.

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