Is Inflation Whipped?
IT TOOK A while to work, and the cure was by no means as painless as promised, but the monetarist prescription for rampant inflation paid off in</br></br>IT TOOK A while to work, and the cure was by no means as painless as promised, but the monetarist prescription for rampant inflation paid off in 1983.	You have to go back to 1972 when the Nixon price controls were in effectÛÓor even back to 1967 depending on what measure you chooseÛÓto find a year in which prices behaved better.</br></br>The nation, however, paid a very high price in lost jobs and output to get that improvement. Unemployment is still far above the 3.8 rate experienced in 1967. And a lot of things not controllable by economic policy-makersÛÓnotably energy prices ^ÛÓhappened to break the right way last year. Will inflation stay in line as the recovery proceeds?</br></br>Many of the most important inflation-feeders were quiescent in 1983. Energy prices, for example, actually declined somewhat following a small rise the year before. Food prices fell in the early months, although summer drought caused a 2.6 percent net rise over the whole year. The high value of the dollar on foreign exchange markets kept imports cheap. Interest rates were more or less stable, big tax breaks lowered costs for many producers and cautious inventory buildup policies kept suppliers from boosting their prices as the recovery took hold. Wage give-backs were still in fashion, and average hourly wage gains were modest.</br></br>Since labor productivityÛÓoutput per workerÛÓrose smartly, at least in the first three-quarters of the year, unit labor costs rose only 1.4 percent.