"Reply to E. Dirksen, "The Control of Inflation? Errors in the Interpretation of CPE Data

Mr Dirksen is trying to make a meal out of rather little, in the manner of cuisine minceur. But the raw materials are skimpy and not top quality, and the result is not to my taste. Particularly unpalatable is the thin sauce of not to say disingenuous, language, liberally applied. I simply cannot have made errors in the interpretation of CPE data that were unavailable at the time I wrote (1976). Even had I thought the Holzman index sufficiently important to try myself to extend it beyond the 1971 figure for the USSR given by Garvy, I could at best have gone through 1974, and (pace Dirksen) the conclusion would have been unchanged. My omission of Soviet CFM prices after 1971 could not have been seriously misleading, since they rose at only 2 per cent per annum in 1971-1974. Nor could my of a continuously falling Holzman be wrong for the period since 1971, since I painted no such picture even for the period 1955-1971 (though it would on the whole be correct) and, having no data, I ignored this indicator's behaviour after 1971. reader without my 1977 paper at hand may now be wondering what I did say on this topic and may indeed be surprised to know that its 19 pages contain only one sentence referring to the CFM and Holzman index data: Tables 4 and 5, moreover, need no interpretation at all to be this view (p. 120). What view? The hypothesis that the planners have in fact maintained macroeconomic equilibrium on the consumption goods market for all but a few brief periods during the past two decades (1955-75).. .. I had based this hypothesis on a wide range of arguments and data, then stated that it was also consistent with the econometric evidence that David Winter and I had so far accumulated. Only then did the sentence quoted above cite the CFM prices for Hungary and Poland 1955-1975 and the Holzman index for the USSR 1955-1971, and the following sentence concluded, Thus we must remain agnostic on this issue . . .. Incidentally, I gave such little weight to the evidence from CFM prices because the theoretical basis for using their relation to state retail prices (i.e., the Holzman index) as an indicator of excess aggregate demand is very weak (e.g., see Pickersgill, 1977, cited by Dirksen). It was precisely the intention of my paper, which Mr Dirksen misinterprets, to direct attention towards macroeconomic arguments and evidence. It is also tendentious to say I admit things that one might just as well have said I claimed. So the 4 per cent open inflation and some repressed inflation in Poland in the early 1970s (p. 1 10), the latter being confirmed by our disequilibrium estimates (Portes and Winter, 1980). Again, our 1978 paper didn't admit, but rather argued at some length, that disequilibrium estimation was essential to test properly the hypothesis stated above

Econometrics · Economics · Inflation (cosmology) · Interpretation (philosophy) · Keynesian economics · Physics · Programming language · Theoretical physics · Computer Science · Economic Growth and Productivity · Global Financial Crisis and Policies · Mathematics · Monetary Policy and Economic Impact

• The Control of Inflation

  Richard Portes•Economica•1977

  Incluir item