on has become embedded in economic behavior, it has been quite difficult to remove its influence. Whether the initial cause is a supply shock, such as the oil crisis in the 1970s, or a demand shock, such as the increased spending on the Vietnam war in the late 1960s, individuals come to expect inflation and incorporate these expectations into their plans. By reinforcing the original change in inflation's level, notes Johns Hopkins economist Laurence Ball, public expectations become one of the chief causes of inflation's persistence in the economy. Letting inflation creep up also threatens to erode public faith in the reliability of political leaders. All the nominal contracts we have today were made possible through trust that the government would not allow massive inflation. Americans' feeling of pride in national institutions depends in part on low inflation or "sound money" as a signal of healthy fiscal and monetary institutions. Finally, inflation can discourage saving and encourage consumption. It thus is perceived as an attack on certain moral virtues -- a strong work ethic, deferred gratification -- that support a healthy economy. John Maynard Keynes made his famous attack on the Victorian virtue of saving -- always "jam tomorrow and never jam today" -- for economic reasons. Consumption in a depression or a recession could strengthen the economy, in his view. But British society took Keynes's mockery as an assault on the core of Victorian morality. Many Americans likewise feel that inflation assaults the legacy here of the Protestant work ethic that places a moral premium on saving over consumption. Fighting inflation thus is seen by many as a moral as much as an economic duty. Americans want their public officials to fight inflation to increase long-term output and employment but perhaps also to strengthen society's moral foundation. ...
