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The rise, decline and rise of incomes policies in the US during the post-war era: an institutional-analytical explanation of inflation and the functional distribution of income

Published online by Cambridge University Press:  01 August 2007

MARK SETTERFIELD
MARK SETTERFIELD*
Affiliation:
Department of Economics, Trinity College, Hartford, CT and Associate Member Cambridge Centre for Economic and Public Policy, Cambridge University. Email: mark.setterfield@trincoll.edu
*
*Correspondence to: Mark Setterfield, Professor of Economics, Department of Economics, Trinity College, Hartford, CT 06106, USA. Email: mark.setterfield@trincoll.edu
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Abstract:

This paper is based on the premise that at any point in time, macroeconomic performance is best understood in terms of certain ‘fundamental’ features of the income-generating process that are embedded in a relatively enduring institutional framework, that both affects and is affected by macroeconomic outcomes themselves. This results in the evolution of capitalist economies through a succession of discrete, medium-term episodes of macroeconomic performance. The purpose of the paper is to apply this vision to the explanation of inflation and the functional distribution of income in the post-war US economy. A conflicting claims model of inflation is developed, in which inflation is the result of conflict over the functional distribution of income. It is then shown how an account of the different, relatively enduring institutions within which this ‘fundamental’ macroeconomic process has been embedded over the past 50 years can be used to calibrate the analytical model, giving rise to an explanation of inflation and the functional distribution of income in the US as having evolved through three discrete episodes. Moreover, once the institutional context of macroeconomic performance is properly recognized in this manner, inflation and the functional distribution of income in the US over the past 50 years are seen to be explained by the rise, decline, and rise of successive incomes policies.

Type
Research Article
Information
Journal of Institutional Economics , Volume 3 , Issue 2 , August 2007 , pp. 127 - 146
Copyright
Copyright © The JOIE Foundation 2007

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