The Conquest of American Inflationby Thomas J. Sargent
In the past fifteen years, inflation has been conquered by many advanced countries. History reveals, however, that it has been conquered before and returned. In The Conquest of American Inflation, Thomas J. Sargent presents a groundbreaking analysis of the rise and fall of U.S. inflation after 1960. He examines two broad explanations for the behavior of/i>
In the past fifteen years, inflation has been conquered by many advanced countries. History reveals, however, that it has been conquered before and returned. In The Conquest of American Inflation, Thomas J. Sargent presents a groundbreaking analysis of the rise and fall of U.S. inflation after 1960. He examines two broad explanations for the behavior of inflation and unemployment in this period: the natural-rate hypothesis joined to the Lucas critique and a more traditional econometric policy evaluation modified to include adaptive expectations and learning. His purpose is not only to determine which is the better account, but also to codify for the benefit of the next generation the economic forces that cause inflation.
Sargent begins with an explanation of how American policymakers increased inflation in the early 1960s by following erroneous assumptions about the exploitability of the Phillips curvethe inverse relationship between inflation and unemployment. In subsequent chapters, he connects a sequence of ideasself-confirming equilibria, least-squares and other adaptive or recursive learning algorithms, convergence of least-squares learners with self-confirming equilibria, and recurrent dynamics along escape routes from self-confirming equilibria. Sargent synthesizes results from macroeconomics, game theory, control theory, and other fields to extend both adaptive expectations and rational expectations theory, and he compellingly describes postwar inflation in terms of drifting coefficients. He interprets his results in favor of adaptive expectations as the relevant mechanism affecting inflation policy.
Providing an original methodological link between theoretical and policy economics, this book will engender much debate and become an indispensable text for academics, graduate students, and professional economists.
"A lucid, penetrating inquiry into the 'ifs and buts' of rational expectations and their implications for policy. . . . This book illustrates Sargent's great curiosity and honesty . . . A beautifully crafted, deep, and . . . very accessible work. . . . It deserves to be one of the century's most influential books on macroeconomics."Peter Sinclair,Times Literary Supplement
"A path-breaking contribution. It shows new ways to analyze dynamic economics. It is a basic reference to understandand developdynamic macroeconomic theory in the 21st century."Ramon Marimon, Journal of Economic Literature
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This is not a book on economics; it¿s a book about math. After reading this excruciatingly tedious essay, I couldn¿t even guess how good of an economist Dr. Sargent is, but I can tell you that he¿s very, very, very good at math. The book has absolutely zero explanation of the cause of inflation (though the author hints that it might be the Fed, but then again maybe not). The author claims that the reason for inflation seemingly to have gone the way of the dodo bird is that the government is using a magic mathematical formula developed by Dr. Sargent and his mathlete friends. These men, and the books they write, are much like the geeks who have learned to speak Vulcan ¿ the rest of us sitting around dumbfounded. Unfortunately, these math Vulcans tell those in power exactly what they want to hear ¿ that it is possible to manipulate the economy without bringing the whole edifice crashing down on top of our heads. This book is less than useless, except as proof that central planning is alive and well, Soviet Union or no.