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)

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William J. Newton

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States