A cultural history of inflation in America

In the course of researching higher education costs in America back to the middle of the 19th century, I discovered something that flew in the face of what I had always assumed about how inflation works in a money economy. What I assumed was that a moderate amount of price inflation is normal — that is, continual rather than episodic — in such economies, and that deflation is rare. Furthermore, I thought (to the extent that unexamined assumptions can be called thinking) any significant or prolonged deflation is an economic disaster, and is something to be feared and avoided even more than hyper-inflation…..As many readers no doubt already know, this historical view of inflation and deflation in America — which I suspect, based on my study featuring an N = 1, is quite widespread — is totally wrong.

You have to give Campos credit for writing this. But what interests me is the question of why there’s been this forgetting. My guess is that it’s mostly because of decades of unanswered anti-inflation propaganda from the right, combined with the standard contempt of educated liberals for the inflationist (I say “reflationist”) Populist Party.

The most important single issue for the 1890s Populists was their opposition to the deliberate deflation of the American currency under the slogan “sound currency”.  Enabling foreign trade and protecting the fortunes of property-owners and creditors were the conservatives’ political goal, and deflation was their method.  The mainstream theoretical understanding of the issue was very poor, but they could deflate the currency passively just by letting the money supply grow more slowly than the economy as a whole. The gold standard did this, because the supply of gold was fairly static. (With a fetishism worthy of the Huns who buried golden artifacts with their great kings, many credited gold itself with this result).  Deflation gave the past (old money) control over the future,kept debtors in bondage or drove them to bankruptcy, and also slowed the growth of the economy. (Discovery of gold in Alaska actually did slightly reinflate the currency after 1898, which relieved the pressure and was one of the factors leading to the demise of the Populists).

The Populists have been ridiculed for a century as funny-money cultists, but the real cultists were the mainstream gold standard thinkers, whereas the greenbackers among the Populists were precursors of contemporary money policies. (That’s why it’s so annoying when goldbugs like Ron and Rand Paul are allowed to portray themselves as populists).

But above all, we’ve been barraged with decades of rightwing propaganda about the horrors of inflation, but no public attention at all has been paid to the equal horrors of deflation. Elite Democrats are enthusiastic about the gap between the politics of consent and the politics of governance and renounced populism long ago,  so they don’t go public about their reasons for whatever it is that they’re doing, and many of them are inflation hawks anyway. But when you do this kind of thing, there’s always the chance that your concealment will confuse the elite of the future.

Greider, William, Secrets of the Temple, Simon and Schuster, 1987.

Nugent, Walter, Money and American Society, 1865-1880, Free Press, 1968.

Friedman, Milton, A Monetary History of the United States, 1867-1960, Princeton, 1963.

Friedman, Milton, Bimetallism Reconsidered, Hoover Institute, 1989.

Mihm, Stephen, A Nation of Counterfeiters, Harvard, 2007.

Ritter, Gretchen, Goldbugs and Greenbacks,  Cambridge, 1997.

This piece is not clear about who it is that I’m addressing. The Democratic money people, the mercenary pros, most of the Democratic elected officials, the media, and part of the Democratic rank and file are quite happy with the neocon / neoliberal Democratic party we now have. However, a considerable proportion of the rank and file (and probably some of the pros and elected officials) wish for a different, less centrist, less passive party, and these are the ones who are being misled by bad social science

For the Democratic leadership, the bad social science is an indispensable tool. They do not want to give their left wing anything at all, but they need that demographic to win elections, and to a considerable degree this accounts for the stupidity, dishonesty, and negativity of the uninterrupted succession of lesser-evil election campaigns.


The aide said that guys like me were “in what we call the reality-based community,” which he defined as people who “believe that solutions emerge from your judicious study of discernible reality.” … “That’s not the way the world really works anymore,” he continued. “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors…and you, all of you, will be left to just study what we do….


Beginning in 1977, upon his appointment as head of the Begin government’s Ministerial Committee on Settlements, Ariel Sharon sought to create “facts on the ground” which would render Israel’s Occupation irreversible….


Some men see things as they are and say why? I dream things that never were and say why not?…


The philosophers have only interpreted the world, in various ways; the point is to change it.

As my few readers know, in my political writing I have especially advocated left populism. I have been relatively silent over the last year or two, partly for personal reasons but mostly because of discouragement. The Democratic Party, the media, and the intelligentsia seem irrevocably committed to anti-populist pluralist liberalism, the national security state and neoliberalism seem impregnable, and even the populace itself may be hopeless. (By this I do not mean the caricature redneck bigots, but the large bloc of voters who have thrown in their lot with interest-group liberalism, and thus have become incapable of majoritarian or populist politics: “Get along, go along”, “What’s in it for me”, and “Can’t fight City Hall”.)

Oddly enough, however, populism never quite disappears, and recently there’s been a 4 against 1 pile-on with Thomas Frank on one side and  Ezra Klein, Nate Cohn, John Chait, and The Economist on the other — see links below. I will make my usual points here, with only a few citations from these sources.

Two of Franks’ points seem quite solid. First, the Democratic Party has been a party of experts since the 1950s — if not the 1930s. The change Klein notices is merely a change in political journalism — partly the result of the new scientific methods he’s celebrating, and partly because an actual change in how politics works. Second, this party of experts hasn’t been doing too well since 1968, and the only wisdom the wonks have to offer is to say that the Democrats should move to the right and wait for the demographics to change.

The Economist:

When it comes to taking back the House, Mr Cohn says, Democrats have two options: tack to the right or “wait for demographic and generational change”.  Mr Frank simply cannot accept that these are the only options.

This strategy has been tried before. In 1960 Chester Bowles published The Coming Political Breakthrough as part of the Kennedy campaign. His major thesis is that demographics would make the Democrats invulnerable and that they  would stay in power for a long time. By 1968 his theory was in shambles. The Democratic coalition had dissolved, and the Republicans had picked up the pieces. It’s been getting worse ever since.

For Chait this is science against anti-science, and he is incredulous that Frank wants to disagree with the scientists who have explained that things are hopeless:

I pointed out that Frank and West alike held in common a lack of familiarity with even the basic concepts of political science, which can explain how structural limits (like divided government and polarization) constrain the domestic powers of a president in a way that cannot be broken with ideological willpower or inspirational speechmaking.’The fatalism here may be science-driven’, he concedes, ‘but still it boggles the mind’. Let that phrase roll around in your head for a moment. Frank has just told you everything you need to know here.”

Chait and probably the others portray Frank as a science denier, but Pol Sci is a limited science heavily corrupted both by academic politics and by external interests. It is good at what it does, but terrible at what it does not try to do. It describes what has already been and projects that into the future. It even tries to predict some future changes (e.g. demographics), but it does not really take into account the remaining unpredictability (which is where the opportinitie lies). And that is why the wisest Democratic advisers are at their best when explaining that nothing much could have been done and that defeat was inevitable.

Contrast the Republicans. They have hired plenty of PhDs, but they keep them under their thumb. The Republican leaders are opportunist demagogues, ideologues, scam artists, and petty criminals, and their politics is venturesome, opportunistic and experimental rather than realistic and passive. When public opinion goes against them they try to change public opinion. When they’re losing they don’t accept defeat but try to change the game. In short, they are political actors rather than normalizing administrators. Many of the wise men of the Democratic Party seem to be against political action in principle.  (Might this not be a necessary characteristic of anti-majoritarian, anti-populist, pluralist liberalism?)

Republican methods have obviously not led to good government, but they have led to victory. The realist wonks of the Democratic Party never tire of telling us that you have to win elections in order to get anything done, but then they immediately also tell us that the only way to win elections is to forget about trying to do anything. Is this really the wisdom we need? Shouldn’t we hope for a less passive, more experimental social science which would test hypotheses in action and not only in studies of the past?

Chait-type sophisticated liberals purport to regret the rightward slide, but this slide hasn’t really harmed anything they really care about, at least not so far. They don’t necessarily want the national security state, permanent state of war, mushrooming inequality, etc., etc., but none of these issues is at the top of their priority list, and in fact, many major Democrats have accepted the permanent state of war and the dominance of finance as either inevitable or positively good or both. For them, Obama is doing things just right, and his critics on the left are simply enemies. They pretend to want the same things we want (damn those Republicans!), but that’s because they need our votes.

There’s more to this, of course.  The most influential Democrats and the most influential media are very well off and have little to gain from more populist policies. The party pros don’t care at all about issues and only want to keep their jobs. And finally, the majority of Democratic donors are out and out bad guys.

So we’re doomed.


Another way to think of “political science” would be to define it as an applied science like engineering. Engineering is about desired results, not scientific truths, and experimental proposals are expressed something like “Find a way to do X”. Negative results are noted but merely motivate a further search for positive results. Thomas Edison discovered 10,000 things that didn’t work before he found the one that did. You would hope that Democrats, liberals, and radicals would be less radically empiricist than Edison, but it’s even more important that they don’t quit after the first unsuccessful trial.


I’ve wondered at times whether some of the incapacities of political science come from adherence to an obsolete model of predictive science, from the time before chaos, complexity, fat tails, fractals, etc. were thought of.  Short term electoral results are in facty one of the things that can be predicted if you have enough data, but only if you hold the really important political factors constant. This is very convenient for political pros who want to limit politics to immediate term electoral politics and avoid big politics.


Ezra Klein, Thomas Frank, Nate Cohn, Jonathan  Chait, The Economist

We often think of the typical segregationist politician of yore as a genteel member of the white upper crust. But the more common mode was the fiery populist.

The Wilmington Insurrection of 1898 and the Tulsa / Greenwood massacre of 1921, two of the bloodiest massacres in white supremacist history, were led respectively by Josephus Daniels (Wilson’s Secretary of the Navy and Roosevelt’s Ambassador to Mexico) and Tate Brady (one of Tulsa’s founders and a Democratic National Committeeman).

And while there were unquestionably populist-style bigots, there were also populist-style anti-bigots: Ralph Yarborough, Estes Kefauver, and Huey Long (who incidentally was Huey Newton’s namesake). Even LBJ was called a populist by elite liberals.

As far as I can tell, after 1896 everyone was racist, including the Republicans. (Another instigator of the Tulsa riot, which killed at least a hundred people and probably many more, was Richard Lloyd Jones, a progressive Republican). The Wilmington Insurrection overthrew the legally elected, mixed-race Republican government of Wilmington, N.C., and along with it the N.C. Populist Party. (Ben Tillman, another leader of the insurrection, was populist “in style”, but a loyal anti-Populist Democrat).



Sex Life of the Nineteenth Century: And Autobiographical Approach to the History of Western Civilization


(Includes “Why Did Henry James Kill Daisy Miller?” and
“Could Friedrich Nietzsche have Married Jane Austen?”)

“The Sex Life of the Nineteenth Century: An Autobiographical Approach to the History of Western Civilization” is looking for its audience. In this apparently random assemblage of egregious code-switching, extravagant whimsy, pedantic smut, and tidbits of obscure trivia, an argument of uncertain affiliation and insidious intent reveals the dark side of truth, love, and seriousness. A perfect book for the right person.

About 80 posts, mostly from  Haquelebac and Idiocentrism. No political, philosophical, or economic rant, and nothing on Chinese philosophy or inner Eurasian history.

An Autobiographical Approach
to the History of Western Civilization

About 80 posts, mostly from  Haquelebac and Idiocentrism. Whimsy, hyperbole, excess, smut, and philosophy. Each title is preceded by an asterisk *, so if you don’t like what you are on you can always page down to the next one with ” find * “.

None of my political, philosophical, or economic polemics are included, not are my more straightforward pieces on Chinese philosophy and inner Eurasian history.

Suggestions consistent with the basic concept of the book are most welcome, and while it would be wrong for me to hope for serious proofreading, reports on bloopers you happen to notice would be appreciated. emersonj at gmail dot com.

     The main reason why Piketty has made such a big splash is that he strikes at the heart of liberal Democrats’ first principle of political economy: “A rising tide lifts all boats”.  This may be a neoliberal principle, but it’s not at all recent. During the 1940s and 1950s Democrats came to believe that there was no conflict between  rich or poor or between labor and management, and that just by “growing the economy” (Clinton’s later slogan) it would be possible to improve the lives of the poor and labor without  demanding anything from the wealthy, and that for this reason a large part of the Democratic political tradition could be jettisoned without really losing anything. From this point on Democratic “populism” (much less radicalism) was discouraged and almost disappeared, and in 1960 the “rising tide” slogan was a Kennedy campaign slogan.


    And wasn’t just a political slogan. Mainstream liberal economists were committed to this principle. In his “Introduction to Positive Economics” (ca. 1950) Milton Friedman claimed that the only differences between liberal and conservative economists were about means: both sides agreed that increasing the size of the economy was the economists’ main (if not only) goal. Few liberal economists disagreed, and by and large this consensus survived until very recently.


     Piketty’s “r>g” formula denies specifically this point. And not only did he disprove the liberal economists’ fundamental principle, he did it using the tools of liberal economics. For forty years or so American workers’ incomes have been stagnant or declining, and as the years have gone by this tendency has intensified. But there has been no theoretical explanation for these very evident facts, and without a theoretical explanation liberal economists felt that their hands were tied; these were things that everybody knew, but no one knew it in a proper scientific way.


     What Piketty did was to accumulate an enormous amount of data which could be presented in forms acceptable to economists, and then to develop a proper orthodox theory, based on this data, which was not based on heterodox economics or (God forbid) anecdotal data and common sense. At this point, liberal economists, like Nixon going to China, could finally acknowledge the existence of the 500-pound gorilla that had been tearing things up for a few decades.

    P. S. You might also ask: “Did the Rising Tide Theory ever have to meet the rigorous standards required of Piketty’s thesis?” The answer is “No, of course not! The Rising Tide Theory was the null hypothesis — the default position that made economists happy, happy, happy! for sixty years.”

P.P.S. Why now? Because the economic growth part of the Rising Tide Theory failed too, five or six years ago, and the lag time built into professional economics to prevent hasty action is five years.

I’ve been reading about Ben Hecht recently. He’s almost forgotten, but he scripted some great movies (Scarface, Front Page, Barbary Coast, Wuthering Heights, Monkey Business) and, because he was a complete master of Hollywood cliches, script-doctored a lot more (Stagecoach, Gone With the Wind, His Girl Friday, Roman Holiday, Angels with Dirty Faces). Hecht started out as a Serious Author who wrote novels which tried to be decadent on the European pattern. He also was a newspaperman and his reporter’s cynicism was equal to Mencken’s. In general he thought that film was a debased, stupid medium. And that’s why he was so great! When he finally decided to switch teams and prostitute himself, his sharp awareness of the trite, cliche-ridden crappiness of film meant that he already knew the business. A sharp mind + cynicism + decadence + a complete contempt for the mass + a mercenary attitude = a genius awareness of what is commercially viable. Hecht was not the only decadent in Hollywood, of course. Mercenary European decadents flocked to Hollywood by the boatload. Hollywood’s sophisticated, decadent mixture of puritanism and prurience, with happy endings often tacked on to the end, is one of the wonders of world culture.


Ben Hecht, A Thousand and One Afternoons in Chicago, Bibliobazaar, 2006 (1923).

Ben Hecht, A Thousand and One Afternoons in Chicago, Google Books.

Ben Hecht, Fantazius Mallare, Frugoli and Taylor, 2001 (1922).

Ben Hecht, Fantazius Mallare, Google Books.

William MacAdams, Ben Hecht: A Biography, Barricade Books reprint, 1990.



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