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The Economic Situation: Chapter I. Prices and Incomes Policy

Published online by Cambridge University Press:  26 March 2020

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Extract

The principle of simultaneously freezing both incomes and prices has an immediate appeal, as being fair. However, it can only be a temporary device; if it were continued—in an effective way—for more than a few months, it would be bound to break down.

Type
Articles
Information
National Institute Economic Review , Volume 62 , November 1972 , pp. 6 - 13
Copyright
Copyright © 1972 National Institute of Economic and Social Research

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Footnotes

page 6 note (1)

In addition to those listed on the inside cover, Miss Pamela Meadows of the National Institute assisted in the preparation of material for this section of the Review.

References

Notes

page 6 note (2) Some macro-economic calculations of the kind discussed during the tripartite talks are set out on page 27.

page 6 note (3) National Institute Economic Review no. 55, February 1971, page 46.

page 7 note (1) The points are discussed more fully in An Incomes Policy for Britain, edited by F. Blackaby, Heinemann Educational Books, London, 1972.

page 7 note (2) See The London Business School Quarterly Econometric Model of the UK Economy, EFU Discussion Paper no. 20.

page 7 note (3) ‘We wanted to stay away from a principle of basing national wage theory on the productivity in an individual company or industry. It doesn't work. You can't live with it. The British tried and the whole thing blew up.’ Virgil Day, ex-member of the US Pay Board, quoted in Business Week, 22 April 1972, page 68.

page 8 note (1) A. A. Walters in Memorial to the Prime Minister, Economic Radicals, London, November 1972.

page 9 note (1) See also B. Bosworth, in Brookings Papers on Economic Activity, 2, 1972; this suggests an effect in reducing the rise in both prices and wages of about 2 per cent.

page 9 note (2) They had before them accounts of the detailed controls exercised by the Office of Price Administration in World War II; for example, there was then a memorandum with six pages of small type which specified what was meant, for pricing purposes, by ‘fruit cake’.

page 9 note (3) However, health operations with sales of $5 million or more and construction businesses with sales of $25 million or more are still included and come under Tier II coverage. The United States system includes special provision for medical care (as table 2 shows, the price rise in this sector has been brought down a good deal), and for the construction industry.

page 9 note (4) Gardener Ackley in Brookings Papers on Economic Activity, 1, 1972, page 177.

page 9 note (5) For example, the Price Commission disallowed car price increases proposed by General Motors and Fords, on the grounds that the increases would take these companies over their profit margin. The Commission allowed price increases proposed by the smaller car producers, but these producers decided against taking them fully.

page 10 note (1) The director of the accounting division of the Office of Price Administration in World War II is on record as saying: ‘Within broad limits, any producer can conscientiously report … any cost he pleases, and there is frequently no way for the Administration to say that the cost submitted is not an accurate reflection of the facts’.

page 10 note (2) The point is discussed by H. Behrend, in An Incomes Policy for Britain, Heinemann Educational Books, London 1972.

page 11 note (1) However, there are special provisions both for the construction industry and for the health care industry. For a fuller discussion of these points see P. B. Doeringer, in An Incomes Policy for Britain, London, 1972.

page 12 note (1) Memorial to the Prime Minister, by the Economic Radicals, London, November 1972; and Lord Balogh, House of Lords, 14 November 1972.