“The laws of economics, it’s often forgotten, are like the laws of engineering. There’s only one set of laws and they work everywhere.” That remark, which Larry Summers delivered more than thirty years ago in connection with the economics of the postcommunist transition countries, remains one of his all-time greatest hits.

It’s fun to laugh at the naivete of such ideas. But that kind of ahistorical thinking can have morbid real-world consequences, and in the great inflation debate of the past two years, I believe it did — above all via the widespread delusion, echoed by Summers and many other prominent economists, that the US economy was at risk of a return to the intractable inflation of the 1960s and 1970s.

To properly explain why that view was a delusion, we need to go back further in time, to the Great Deflation of 1929–1933, when John Maynard Keynes and his colleagues at Cambridge University were turning their attention to the question of what determines the price level. It was then, in the early 1930s, that Keynes finally abandoned the ancient Quantity Theory of Money, as I discussed in this previous article.