The 1971-1974 Controls Program and the Price Level: An Econometric Post-Mortem

23 Pages Posted: 5 Jul 2004 Last revised: 8 Oct 2022

See all articles by Alan S. Blinder

Alan S. Blinder

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

William J. Newton

National Bureau of Economic Research (NBER)

Date Written: October 1981

Abstract

This paper provides new empirical evidence on the effects of the Nixon wage-price controls on the price level. The major new wrinkle is that the controls are treated as a quantitative (rather than just a qualitative) phenomenon through the use of a specially-constructed series indicating the fraction of the economy that was controlled. According to the estimates, by February 1974controls had lowered the non-food non-energy price level by 3-4 percent. After that point, and especially after controls ended in April 1974, a period of rapid 'catch up' inflation eroded the gains that had been achieved, leaving the price level from zero to 2 percent below what it would have been in the absence of controls. The dismantling of controls can thus account for most of the burst of 'double digit' inflation in non-food and non-energy prices during 1974.

Suggested Citation

Blinder, Alan S. and Newton, William J., The 1971-1974 Controls Program and the Price Level: An Econometric Post-Mortem (October 1981). NBER Working Paper No. w0279, Available at SSRN: https://ssrn.com/abstract=260471

Alan S. Blinder (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

William J. Newton

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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