HYPE Webinar series: Nonmonetary and monetary explanations for inflation: the UK in the 1970s

This webinar organised by the HYPE research cluster is part of a series of webinars focused on an interdisciplinary research agenda using insights from political economy and history.

In a series of papers, Edward Nelson argued that between 1945 and 1979, the monetary authorities in the UK pursued economic policies steeped in a nonmonetary view of inflation. This came to a head by the early 1970s with the Heath-Barber boom and the highest rates of peacetime inflation in the UK by 1975.

Nelson’s work draws on primary sources in the form of British Parliamentary volumes, many newspaper articles, and contemporary published speeches as well as some archival material from the Heath era. Forrest Capie’s archival-based history of the Bank of England gives further credence to the monetary policy neglect hypothesis, but this has been challenged by Duncan Needham who argues that the authorities were already thinking about monetary policy in terms of monetary aggregates from the early 1970s.

Drawing on Treasury archives and other sources, this paper shows that during the 1970s, policymakers had limited concerns about the money supply and only introduced new measures for political economy reasons. The paper contends that the monetary policy neglect thesis holds for the 1970s.

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