The Camelot Years
By historical standards, things were going swimmingly. On a decade-by‐ decade basis, the 1950s shows one of the best records in terms of unemployment in this century. However, recall our earlier comments about the psychology of unemployment. If you are accustomed to and expect 10 percent unemployment, 5 percent seems a delight. But once you become accustomed to 5 percent, it is no longer so desirable. You begin to yearn for 4 percent, or 3 percent, or ultimately none. Besides, the Great Depression was fading in memory. No longer would its average unemployment of over 18 percent serve as a yardstick by which we would gauge the positive dimensions of the immediate post-World War II unemployment experience. From here on, the role of the Great Depression would be to serve as the ultimate justification for government action designed to reduce unemployment below the levels to which we had now become accustomed. And, since we now expected such unemployment, almost by definition it had to become unsatisfactory in the minds of those with an economic policy agenda to advocate.
By the middle to late 1950s, there were signs of an emerging tide of discontent with even the economic performance of that decade. In 1957 the dean of Keynesian economists, Alvin Hansen, while acknowledging that things had not gone too badly since the 1930s, was arguing that we could do better, if we could shed ourselves of our fears of inflation. 1 By the standards of the years to come, especially the 1970s, the inflation of the late 1950s seemed trivial. However, for a brief period, as that decade neared its close, the question of the propriety of inflation was at center stage among