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Textbook Explanations of Inflation in the 1970s

Author

Listed:
  • Robert A. Mcguire

    (University of Akron)

  • Elliott S. Willman

    (New Mexico State University)

Abstract

This survey of 23 macroeconomics textbooks shows that many contain an analysis of inflation during the 1970s that is potentially misleading. The survey indicates the predominant textbook explanation of inflation in the 1970s is that price increases of imported oil caused supply-side shocks that led to cost-push inflation. The textbook oil story of inflation is frequently based on casual empiricism, often fails to directly integrate monetary policy, and could have been presented using the price of any basic imported commodity. The contention in this article is that the oil story of inflation is included in the textbooks, even if it is flawed and misleading, because it is a low-cost, easily understood explanation that is consistent with a Keynesian view of inflation. The oil story, moreover, is included in textbooks because it is considered an accurate story of inflation by nearly all authors. Personal correspondence with the textbook authors offers support for this explanation for inclusion of the oil story in the textbooks.

Suggested Citation

  • Robert A. Mcguire & Elliott S. Willman, 1999. "Textbook Explanations of Inflation in the 1970s," Public Finance Review, , vol. 27(1), pages 52-76, January.
    • Handle: RePEc:sae:pubfin:v:27:y:1999:i:1:p:52-76
    DOI: 10.1177/109114219902700103
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    References listed on IDEAS

    as
    1. J. Cebula Richard & Frewer Michael, 1980. "Oil Imports And Inflation: An Empirical International Analysis Of The ‘Imported’ Inflation Thesis," Kyklos, Wiley Blackwell, vol. 33(4), pages 615-622, November.
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    3. McCloskey, Donald N, 1985. "The Loss Function Has Been Mislaid: The Rhetoric of Significance Tests," American Economic Review, American Economic Association, vol. 75(2), pages 201-205, May.
    4. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    5. repec:bla:kyklos:v:33:y:1980:i:4:p:615-22 is not listed on IDEAS
    6. Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
    7. Hamada, Koichi & Sakurai, Makoto, 1978. "International Transmission of Stagflation under Fixed and Flexible Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 877-895, October.
    8. Bruno, Michael, 1978. "Exchange Rates, Import Costs, and Wage-Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 379-403, June.
    9. Duck, Nigel W, 1993. "Some International Evidence on the Quantity Theory of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 1-12, February.
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    Full references (including those not matched with items on IDEAS)

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