Crank or Proto-Monetarist?: J.K. Gifford and the Cost-Push Inflation Fallacy1

This paper examines the career and contribution of J. K. Gifford (1899–1987), the Foundation Professor of Economics and first Head of the Department of Economics at the University of Queensland, and one of the first in Australia to write an introductory textbook. Gifford’s publications were often poorly written and with few references. They focussed mainly on monetary theory and inflation and towards the end of his career concentrated on challenging the notion of a wage-price spiral. Much of his work on the ‘cost-push fallacy’ seems to have been based on a crude kind of monetarist thinking: governments were prone to allow monetary growth to sustain high profit levels that businesses enjoyed in an inflationary environment. However, his policy proposals were not those of the freemarket Right and focussed on safeguarding employees’ interests by ensuring that their wages increased at the rate of inflation plus productivity growth, thereby limiting the scope for employers to benefit from inflation. Although he saw the money supply as exogenous and prone to be mismanaged by governments, he did not articulate a model of the demand for money or defend the stability of the velocity of circulation. His most important article, a brief paper in the Journal of Political Economy in 1968, came about from his objections to the original Phillips analysis, and argued that correlation does not establish causation. Precisely this argument could also be levelled against the monetarist thinking of Milton Friedman and it was not long before the paper’s basic argument was used by Nicholas Kaldor in this way.