Published online by Cambridge University Press: 02 December 2009
The seemingly obvious remedy for the wage-price spiral is to regulate prices and wages by public authority. In World War II and the Korean War in the United States demand pressed strongly the capacity of the labor force as well as that of the industrial plant… During both conflicts the wage-price spiral was successfully contained by controls.
John Kenneth Galbraith, 1967Price and wage controls waste labor, both because of the distortions in the price structure and because of the immense amount of labor that goes into constructing, enforcing, and evading the price and wage controls. These effects are the same whether controls are compulsory or are labeled “voluntary.”
Milton Friedman, 1979The challenge of inflation
One of the most important debates on economic policy in recent years has concerned wage and price controls. For over a decade, the non-communist world has suffered a chronic inflation which has disordered economic life and crippled attacks on unemployment and poverty. Traditional remedies have proved costly when not ineffective, and there are few observers who would dare predict that the problem will abate soon. Inevitably, the hope emerges that order might be restored by bringing the power of the state to bear on wage and price decisions. But just as inevitably, warnings arise that the cure will be worse than the disease. Bureaucracy, inefficiency, evasion, and corruption, it is said, will become the identifying features of the controlled economy. Clearly, if the participants in the debate are correct, the stakes are high.
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