- Wage-price spirals are viewed as inflationary nightmares, but they are far less common than believed.
- In the 1970s, the inflation stems more from successive oil-price shocks rather than from prior wage gains.
- Short-term spirals were not followed by a sustained acceleration in wages and prices.
- Wages shot up simply because demand for workers outstripped supply.
- Overheated economies are worth worrying about regardless of whether prices and wages are feeding on each other.
Wage-price spirals are far scarier in theory than in practice
Rising salaries are a poor predictor of future inflation. Wage-price spirals are far less common than believed and can be driven by the same force: excessive spending in the economy compounded by shortages of both products and the workers to produce them. Overheated economies are worth worrying abou