The Great Wave: Price Revolutions and the Rhythm of History.

• Author: Clark, Gregory

If Alan Greenspan has not already got a copy of this book by his bedside, then Oxford University Press ought to send it to him as a belated wedding present. Greenspan has been condemned by such advocates of organized labor as Robert Reich for his monomaniacal devotion to controlling inflation at the expense of all other social goals. Others have derided his job, with its tight-lipped incremental squeezing and relaxing of the federal funds rates - now up a quarter of a point, now down a quarter of a point - as the most boring in the world (suggesting such jokes as, "Can Alan Greenspan be cloned? Depends on if you need living tissue."). Yet here comes David Hackett Fischer, a history professor at Brandeis University, to claim through a study of eight centuries of world price history that not only is inflation undesirable, it is the mother of all evils, including falling real wages, inequality, fiscal crises, crime, marital disharmony, revolution, and war. Greenspan is thus on the front lines in the struggle for civilization.

The only discomforting thing for our Federal Reserve chairman in Fischer's analysis is the conclusion that inflationary pressures themselves are merely the visible sign of a deeper social cycle. Hence, if Greenspan does succeed in reducing inflation to zero, it will not be the result of his personal magnetism, but simply a sign that the current inflationary cycle has run its course, and inevitably a happy age of price stability is to follow. Greenspan is thus a mere cog, if a well-oiled and comfortably positioned cog, in a larger social machine, whose eternal cycles of inflation and stability can be traced back at least as early as the 13th century.

Fischer argues that the world has seen four great waves of inflation and stability since 1200. Each of these waves began with a long inflation - the Medieval Price Revolution (1200-1320), the 16th Century Price Revolution (1520-1620), the 18th Century Price Revolution (1720-1820), and the 20th Century Price Revolution (1896-1997) - followed by long periods of price stability. In each price revolution, population grew and real wages fell, while returns on capital and land ownership rose and such measures of social discord as crime and illegitimacy increased. Governments saw increasing fiscal crises, and revolution and war became more prevalent. In the succeeding periods of stability, real wages rose, returns on land and capital fell, and social, fiscal, and political harmony were restored.

The fundamental cause of these cycles, Fischer argues, is people's expectations. In the good...