On March 29 and 30, the Center for the Study of American Democracy (CSAD) hosted several economics professors, researchers and authors to discuss inflation — which averaged 8.0% in 2022 — at its biennial conference, titled “What’s My Dollar Worth? Inflation’s Causes, Consequences and Cures.” The event included a Wednesday evening keynote address given by Adam Tooze, the Kathryn and Shelby Cullom Davis Professor of History at Columbia University, a Common Hour talk on Thursday by David H. Feldman ’78, professor of economics at the College of William and Mary and three panel discussions.
The keynote address titled “Inflation, Politics and Policy: How Do We Learn from History?” was held in the newly built Oden Auditorium with over 50 people in attendance. Professor of Political Science and CSAD Director Joseph Klesner introduced Tooze as a historian, commentator and author of multiple books — most recently, Shutdown: How Covid Shook the World’s Economy.
Tooze talked about how the economic history around inflation informs the actions governments take today to fight inflation. He started his lecture by giving a broad overview on the history of inflation and began by showing some historical examples, defining inflation as “a general upward movement of all prices,” including wages.
Before the 1970s, economists across the world believed they could achieve a targeted unemployment rate by adjusting the inflation rate, or vice versa using principles from the Phillips Curve, which shows the inverse relationship between inflation and unemployment. Starting in the 1970s, however, economic actors began to predict the behavior of the government and attempted to game the system. The predictive power of the Phillips Curve began to collapse as inflation and unemployment increased simultaneously. As inflation increased throughout the ’70s, the Gerald Ford administration set price controls in certain sectors, which only exacerbated the problem.
In a move that finally tamed inflation, Paul Volcker took office as the chairman of the United States Federal Reserve in 1979. Under Volcker, the U.S. and other countries restructured their central banks to make them more independent from the pressures of politics and simplified their mandates.
Today’s inflation is caused by both demand- and supply-side shocks. On the demand side, the Federal Reserve has been injecting cash into the economy since 2009. The shock to the supply side was caused by major supply chain disruptions during the COVID-19 pandemic and the war in Ukraine. To fight this, central banks around the world, including the Federal Reserve, have been increasing interest rates.
Tooze concluded his talk by comparing the soaring inflation rates of the ’70s and today. He said that central bankers have looked to the ’70s for inspiration in combating inflation. However, he argued that returning to Volcker’s strategy of raising interest rates to extremely high levels may not be sufficient to reduce current inflation because that strategy addresses demand-side shocks only, and current inflation rates are largely driven by supply chain shocks such as the war in Ukraine. In contrast, progressive policymakers, who are attempting to avoid the consequences for business growth caused by high interest rates, are looking for alternative solutions from the ’70s like directly addressing supply chain bottlenecks at the international level.
Klesner was one of the many people at the event who enjoyed the speech. “Adam Tooze was a phenomenal speaker, encyclopedic in his knowledge of financial history and so energetic!” he wrote in an email to the Collegian.
Feldman’s presentation the following day, “College Cost in Inflationary Times,” focused on the intersection of inflation and the steadily rising costs of a college education, a topic Feldman said had not yet been the subject of any extensive academic research.
He began by displaying a graph illustrating that after a period of rapidly rising college costs in the 1950s and ’60s, the costs, strangely, stabilized in the 1970s. Feldman attributed this to a simultaneous decline in labor productivity growth along with the rise in inflation over the time period, which caused prices of services to stagnate along with productivity. He also noted that the rising cost of education present today is not keeping pace with inflation, meaning that the real cost of tuition has been declining and may continue to do so as the number of high school graduates decreases.
Vice President for Enrollment Management and Dean of Admissions Diane Anci was pleased that Feldman was included in the conference. “His focus as an economist is on the world I inhabit everyday,” Anci wrote in an email to the Collegian. “From the sources and impact of inflation in the ’70s to the enrollment landscape today, I appreciated the extent to which he was able to represent the complexities around price and cost.”
In addition to Tooze’s and Feldman’s lectures, CSAD hosted three panel discussions on Thursday addressing contemporary inflation, the politics shaping it and potential remedies.
Atli Hrafnkelsson ’23, an international studies major from Iceland, came away from the conference with optimism for the future. “[It] made me calmer about inflation rather than more concerned, which I thought was odd,” he wrote in an email to the Collegian. “I looked at this as a learning experience for the future. Like with many things, people fear what they don’t know. By gaining a better understanding of whatever subject, we can then use our tools to better understand the world around us and how to handle the situation in front of us.”
Klesner was happy to report the conference as a success. “Participants in the program reported being very pleased with the opportunity to meet each other and discuss the topic of inflation from many different perspectives.”
Executive Director Reid Stautberg contributed to reporting.
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