An Explanation Of Stagflation

"A Bastard Golden Age
We must now consider another type of limit upon the rate of accumulation. Inflationary pressure, bringing financial checks into operation, may arise when there is no scarcity of labour - indeed a great mass of non-employment - if the real-wage rate refuses to be depressed below a particular level. A higher rate of accumulation means a lower real-wage rate. When the desired rate of accumulation is greater than the rate which is associated with the minimum acceptable real wage, the desire must be checked. A situation in which the rate of accumulation is being held in check by the threat of rising money wages due to a rise in prices (as opposed to rising money wages due to a scarcity of labour) may be described as a bastard golden age.

The rate of accumulation may be less or greater than the rate of growth of population, so that non-employment is increasing or diminishing. (In the latter case the system is heading towards a legitimate golden age.)

A bastard golden age sets in at a fairly high level of real wages when organized labour has the power to oppose any fall in the real-wage rate. Any attempt to increase the rate of accumulation, unless it is accompanied by a sufficient reduction in consumption out of profits, is then frustrated by an inflationary rise in money-wage rates. In such a situation, the rate of accumulation is limited by the 'inlation barrier'.

A low-level bastard golden age is seen when the real-wage rate is at the minimum level tolerable. (A low-level bastard golden age might have the same standard of life as obtains in a leaden age, but the mechanism of the system is different. In a leaden age the slow rate of accumulation keeps the standard of life to a minimum; in the bastard golden age the minimum standard of life sets a limit to the rate of accumulation.)" -- Joan Robinson (1962). "A Model of Accumulation" (In Essays in The Theory of Economic Growth, Macmillan)

I did not reproduce a footnote in which Robinson references Richard Kahn's "Exercises in the Analysis of Growth" (Oxford Economic Papers, June 1959). Kahn puts forth a similar theory.

I might have read somewhere that if somebody offers a theory that explains a phenomenon before it is observed, scientists will tend to take that theory up for closer examination. But that would have not been written about economics.