Skip to main content
    • Aa
    • Aa

The rise, decline and rise of incomes policies in the US during the post-war era: an institutional-analytical explanation of inflation and the functional distribution of income


This paper is based on the premise that at any point in time, macroeconomic performance is best understood in terms of certain ‘fundamental’ features of the income-generating process that are embedded in a relatively enduring institutional framework, that both affects and is affected by macroeconomic outcomes themselves. This results in the evolution of capitalist economies through a succession of discrete, medium-term episodes of macroeconomic performance. The purpose of the paper is to apply this vision to the explanation of inflation and the functional distribution of income in the post-war US economy. A conflicting claims model of inflation is developed, in which inflation is the result of conflict over the functional distribution of income. It is then shown how an account of the different, relatively enduring institutions within which this ‘fundamental’ macroeconomic process has been embedded over the past 50 years can be used to calibrate the analytical model, giving rise to an explanation of inflation and the functional distribution of income in the US as having evolved through three discrete episodes. Moreover, once the institutional context of macroeconomic performance is properly recognized in this manner, inflation and the functional distribution of income in the US over the past 50 years are seen to be explained by the rise, decline, and rise of successive incomes policies.

Corresponding author
*Correspondence to: Mark Setterfield, Professor of Economics, Department of Economics, Trinity College, Hartford, CT 06106, USA. Email:
Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

G. Akerlof 2002, ‘Behavioral macroeconomics and macroeconomic behavior’, American Economic Review, 92: 411433.

R. C. K. Burdekin and P. Burkett 1996, Distributional Conflict and Inflation: Theoretical and Historical Perspectives, London: Macmillan.

R. Clarida , J. Gali , and M. Gertler 1999, ‘The science of monetary policy: a new Keynesian perspective’, Journal of Economic Literature, 37: 16611707.

R. Clarida , J. Gali , and M. Gertler 2000, ‘Monetary policy rules and macroeconomic stability: evidence and some theory’, Quarterly Journal of Economics, 115: 147180.

J. Cornwall and W. Cornwall 2001, Capitalist Development in the Twentieth Century, Cambridge: Cambridge University Press.

D. M. Kotz , T. McDonough , and M. Reich (eds), 1994, Social Structures of Accumulation: The Political Economy of Growth and Crisis, Cambridge: Cambridge University Press.

J. Kregel 1976, ‘Economic methodology in the face of uncertainty’, Economic Journal, 86: 209225.

M. Setterfield 1997, ‘Should economists dispense with the notion of equilibrium?’, Journal of Post Keynesian Economics, 20: 4776.

M. Setterfield and J. Cornwall 2002, ‘A neo-Kaldorian perspective on the rise and decline of the Golden Age’, in M. A. Setterfield (ed.), The Economics of Demand-Led Growth: Challenging the Supply Side Vision of the Long Run, Cheltenham: Edward Elgar.

M. Setterfield and T. Lovejoy 2006, ‘Aspirations, bargaining power and macroeconomic performance’, Journal of Post Keynesian Economics, 29: 117--148.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Institutional Economics
  • ISSN: 1744-1374
  • EISSN: 1744-1382
  • URL: /core/journals/journal-of-institutional-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 3
Total number of PDF views: 8 *
Loading metrics...

Abstract views

Total abstract views: 52 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 28th May 2017. This data will be updated every 24 hours.