Comment on AMERICA S HISTORICAL EXPERIENCE WITH LOW

I do not find a great deal to disagree with in Brad DeLong's paper. But I think a number of the points he raises could bear some additional elaboration and discussion. DeLong begins by noting, correctly, that the 1970s were something of an aberration, being the only period of sustained peacetime inflation in U.S. history. He argues that, historically, the United States has been a "hard-money" country, and hence that the most reasonable forecast is that U.S. inflation will be low in the future. Although I tend to agree with the forecast, I don't find Brad's inductive argument persuasive. Ideas, ideology, and the balance of political interests change over time, and with them the institutions and objectives of macroeconomic policy. For example, Great Britain was the epitome of a hard-money country during the classical gold standard era of the late nineteenth century, reflecting inter alia the ascendancy of the gold standard ideology, the distribution of political power between the financial interests and the working classes, and an incomplete understanding of the links between monetary policy and unemployment (Eichengreen 1992). In the thirty-five-year period between World War II and the Thatcherite Revolution, in contrast, British politics and ideology were such that the country faced perennial problems with inflation and the balance of payments, and at one point required the assistance of the IMF. Likewise, the United States is not without latent political support for inflationary policies, from Buchananite populists and unreconstructed New Dealers among others. These pressures could well resurface if, for example, unemployment were to become a problem again. To convince us that this outcome is impossible or unlikely requires a much more detailed argument than is made in the paper. While I do believe that a low-inflation environment is likely to persist in the United States for the foreseeable future, largely because of the demonstrable success of the low-inflation policies of Volcker and Greenspan, it would be a mistake to become complacent. If we assume that low inflation will continue, what dangers if any does this present? (I take as granted that low inflation also brings many benefits.) DeLong dis