There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know.
|Donald Rumsfeld, chariman of President|
Nixon's Cost of Living Council
Slavoj Žižek added the category of unknown knowns to Rumsfeld's taxonomy. Things we know but don't know that we know. For example, we know that on August 15, 1971, President Nixon announced his "New Economic Policy," which include wage and price controls, a 10% surcharge on imports and the closing of the official gold window. This was the final nail in the coffin of the Bretton Woods agreement.
We also know that a number of significant statistical trends take shape shortly after that event, two of which were a growing gap between real hourly compensation and productivity and a steady increase in labor force participation.
|BLS: "The compensation-productivity gap: a visual essay"|
If wage controls worked, it should not be surprising to see a growing gap between productivity and compensation. And if wages stagnated, it should not be surprising to see growing labor force participation as households attempted to compensate for stagnant wages by supply more hours to the workforce. Running faster to stay in place.