House of Paine

liquidation of the labor reserve

now we fight  
 wage push inflation 

with unemployment....


gotta be a better way even in a market system 

gyro bill vickret 
to the rescue...

try on this inflation fighter scheme 


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"a NIARRU 

 ( ed: a steady rate of unemployment 
that is high enough 
to avoid setting off 
  a wage push price spiral...)

is likely to prove 
somewhat volatile and difficult to predict
 and in any case it might prove desirable
 to push to full employment
 somewhat faster 
than would be permitted 
by an unaltered NIARRU"


" This would call for 
the introduction of some new means
 of inflation control 
that does not require
 unemployment for it to be effective"

 Indeed, if we are to control 
three major macroeconomic dimensions
 of the economy,
 namely
 the inflation rate,
 the unemployment rate,
 and 
the growth rate
 a third control is needed  anyway

one that is  reasonably non-collinear 
in its effects 
to those of a fiscal policy
 operating through 
disposable income generation
 on the one hand,
 and
 monetary policy operating through 
interest rates 
on the other" 

"What may be needed 
is a method of directly controlling 
inflation that do not interfere
 with free market adjustments 
in relative prices 
or rely on unemployment to keep inflation in check."

" Without such a control, 
unanticipated changes in the rate of inflation,
 either up or down,
will continue to plague the economy
 and make planning for investment difficult.

 Trying to control an economy 
in three major macroeconomic dimensions 
with only two instruments 
is like trying to fly an airplane 
with elevator and rudder
 but no ailerons; 

in calm weather 
and with sufficient dihedral
 one can manage 
if turns are made very gingerly,
 but trying to land in a cross-wind 
is likely to produce a crash." 

"One possible third control measure :

 a system of marketable rights to value added
 (or "gross markups")
 issued to firms enjoying limited liability
 proportioned to the prime factors employed
 such as labor and capital
 with an aggregate face value 
corresponding to the overall market value
 of the output at a programmed overall price level

 Firms encountering a specially favorable market
 could realize a higher than normal level
 of markups only by purchasing rights
 from firms less favorably situated

 The market value of the rights 
would vary automatically
 so as to apply the correct downward pressure
 on markups to produce 
the desired overall price level

 A suitable penalty tax 
would be levied on any firm
 found to have had value added 
in excess of the warrants held "

viola !!!!!

discussion to follow