Commentary
The recent loss of control of inflation and worry about potential stagflation ahead is to a very large extent repeating the history of the 1970s, a period that is worth serious study to learn the lesson. The appointment of Arthur Frank Burns as a new Fed chair to replace William McChesney Martin, a hawker to fight inflation, was revenge. It was Martin who maintained a tight policy in the early 1960s that made Richard Nixon fail in his first presidential election. As Nixon finally got the seat, he made it a high tone that the Fed would be “cooperative.”
Arthur Frank Burns on a file photo of 1955. (Oscar Porter, U.S. Army Photograph)
By the mid-1950s, Burns was already the chairman of the Council of Economic Advisors (CEA). He was a famous professor in the business cycles field; his doctoral advisor was the founder of cycle studies Wesley Clair Mitchell. Their joint publications of “Production Trends in the United States Since 1870” in 1934, and “Measuring Business Cycles” in 1946, laid down the foundations of how the National Bureau of Economic Research date cycles. When the later Fed chair Paul Adolph Volcker Jr. was doing his undergraduate study, Burns was his influential teacher….