Professor bates's paper has set the whole background for a discussion of the price system in war-time, and has raised important theoretical problems. I propose to deal rather with specific measures, of policy and organization which have been undertaken in the present war period, and lead up to some indications of the serious problems which loom ahead.

I shall have little to say here on the broad problems of controlling inflation. These have been attacked mainly by fiscal measures, though the co-ordination of such fiscal measures with other policies of control is of the most vital importance. The foundation of price control has been since September, 1939, and must in large measure continue to be, a fiscal policy which has endeavoured to channel the increase in purchasing power through the Treasury into the procurement of essential supplies. Such specific measures as the Excess Profits Tax have had a very important influence in reducing the incentive of the business, seller to raise prices, though the Excess Profits Tax doubtless has an opposite effect on the business firm as a purchaser.

By luck and good management, fiscal policy has been so far reasonably successful, but it has up to the present not encountered really serious inflationary problems. It is sufficient, however, to say here that without an appropriate fiscal policy no measures for the control of prices or supplies can be fully successful.

For my own purposes I suggest three elements of background for a discussion of this subject.