Terms of the Times (1): In the Keynesian era, cost-push "attracted widespread attention"

 

... prices started noticeably rising in 1956 and this upward trend continued through to 1960 with a short interruption in 1958. This persistent inflation attracted widespread attention for it was occurring in peacetime and did not seem to fit the traditional explanations of general price movements. The government and Congress actively engaged in the resultant debate...

-- Norikazu Takami

 

An ngram comparing the terms "supply shock" and "cost-push":

The ngram for the word "inflation"  peaks in 1978 and, like inflation itself, drops rapidly after 1980. For me, the rate of inflation explains why the blue curve here never goes as high as the red. Changes in the rate of inflation also may help explain why red goes down so much farther than blue goes up between 1970 and 2000, the low level of both thereafter, and the decline of both after 2010.

It is certainly easy to see the huge focus on "cost-push" between the second World War and the first Oil Crisis. Is it bigger than you thought? It is far bigger than I thought. But the whole concept of cost-push inflation has been pretty well extinguished from modern thought.

Years ago now, Nick Rowe commented at Josh Hendrickson's Nominal Income and the Great Moderation. Nick quoted Hendrickson:

Josh: “Rather, the view of Burns and others was that inflation was largely a cost-push phenomenon...”

and replied:

People forget (and maybe younger people never knew) just how common that view was in the 1970’s. It was common among economists as well as the general population. It was almost the orthodoxy of the time, IIRC.

"... maybe younger people never knew..." Yes, the whole concept of cost-push inflation has been pretty well extinguished from modern thought. But as you can see in the ngram above, from 1967 to 1980 (check my work) the term "cost-push" was used more than twice as often as the term "supply shock" has ever been used. What remains of cost-push has been removed from the lexicon -- and from modern thought -- by the change in terminology.

The whole concept of cost-push inflation has been pretty well extinguished from modern thought. That would be okay if there was no such thing as cost push inflation. It would be okay if there was no possibility that rising cost will cause a slowing of economic growth unless the cost pressure is relieved by inflation.

In other words, the whole long-term problem of declining economic growth could be due to cost pressure that we overlook because we took the "cost-push" concept and flushed it down the toilet.