Bryan Caplan  

WIN and the PBC

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I'm too young to remember, but my memory still instantly links Ford with his risible "Whip Inflation Now" (WIN) buttons. The same memory inspires James Hamilton to write an inspired account of the famed Burns-Nixon Political Business Cycle (PBC). I didn't realize we had a smoking gun:

When Nixon himself became president in 1968 and had the opportunity to appoint a new Chair for the Federal Reserve in 1970, the man he turned to was the same Arthur Burns who had advised him to ease up on monetary policy prior to the 1960 election. Milton Friedman offered these impressions in a 2000 interview that is included in the book Inside the Economist's Mind:
From the moment Burns got into the Fed, I think politics played a great role in what happened. So far as Nixon was concerned, there is no doubt, as I know from personal experience. I had a session with Nixon sometime in 1970-- I think it was 1970, might have been 1971-- in which he wanted me to urge Arthur to increase the money supply more rapidly [laughter] and I said to the President, "Do you really want to do that? The only effect of that will be to leave you with a larger inflation if you do get reelected." And he said, "Well, we'll worry about that after we get reelected." [page 116].

Now, I do agree with Dave that it is easy to make mistakes running the Fed in real-time that many of us would have avoided with 20-20 hindsight... But I am forced to conclude also that, in the face of such uncertainties, Nixon and Burns appear to have been wanting to err on the side of doing whatever would most help them win the next election.

And, despite the clever arguments that Dave brings up in the WIN button's favor, I think one great disservice of that campaign was to cultivate the misperception that inflation is somehow the responsibility of ordinary U.S. citizens. In my view, maintaining the purchasing power of a dollar is instead exclusively the responsibility of the people who control how many dollars get printed.

If we want to bring those cute little WIN buttons back, the only people who should be wearing them are the folks who sit on the FOMC.

Ben Bernanke's old enough to have a box. I wonder if he does?


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COMMENTS (4 to date)
Don Lloyd writes:

Bryan,

And, despite the clever arguments that Dave brings up in the WIN button's favor, I think one great disservice of that campaign was to cultivate the misperception that inflation is somehow the responsibility of ordinary U.S. citizens. In my view, maintaining the purchasing power of a dollar is instead exclusively the responsibility of the people who control how many dollars get printed.

Not strictly true. After whatever number of dollars are printed, all individuals in aggregate determine the marginal exchange value of the dollar by choosing how many dollars, and how much future purchasing power, to hold as a cash balance alternative to spending or investment.

Regards, Don

IIRC, we expected Carter to hand out Stop Inflation Now (SIN) buttons.

Steve Sailer writes:

Historian Allan Matusow's book on Nixon's economic policy, written from a Friedmanite perspective, contains lots of smoking guns.

William Barnett writes:

The quotation in Hamilton's blog post is from the book, Samuelson and Barnett, "Inside the Economist's Mind." Those who might want to find the other "smoking guns" in that book will be able to do so easily, since the paperback edition now is available at Amazon and in many bookstores. Paul and I will be on "Bloomberg on the Economy," to discuss that new book at 2 - 3 pm EST Tuesday, January 16.

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