Nations and Inflation

During the 1970s and early 1980s, many sociologists argued that inflation couldn't be fully explained by factors such as the money supply or the Phillips Curve:  that "sociological" factors like power and norms were involved (see this book for a once well-known example, this post for another example).  This view didn't make much headway with economists and after a while the sociologists lost interest and drifted away.  But recently Paul Krugman said "inflation ... is always associated with severe political and social disruption. To stand Milton Friedman on his head, high inflation is never and nowhere a merely monetary phenomenon."

Using the data discussed in my last post, you can rank different nations on their average rate of inflation, adjusting for the years for which data are available (as far back 1956 for some countries, at least to 1998 for all).

Turkey
Slovenia
Poland
Mexico
Hungary
Slovak Republic
Chile
Israel
Iceland
Estonia
Czech Republic
Korea
Spain
Portugal
Greece
Italy
New Zealand
United Kingdom
Ireland
Australia
Finland
Norway
Denmark
France
Sweden
USA
Canada
Austria
Belgium
Netherlands
Luxembourg
Germany
Switzerland
Japan 

A couple of clear patterns emerge:  (1) nations with higher average rates of inflation are poorer than those with low rates.  Some of this may be a matter of high inflation holding down growth, but I'm confident that there would be a strong correlation with per-capita GDP at the beginning of the period (2) most of the nations with high average inflation experienced a transition (or at least a partial transition) from dictatorship to democracy.  You could probably think of a "pure" economic explanation for the first pattern, but the second one suggests that Krugman is right and that sociologists gave up too easily.