Confessions of a Price Controller

...In stead, most of the book dwells o. day-to-day mechanics, the pull and tu, among the various agencies and commis sions, and the personalities involved However, some of the material is reveal ing...

...and the monetary authority, fearing this prospect, will force interest rates back down (or prevent them from risinginitially) by increasing the money supply at a rate greater than that consistent with the current level of transactions of goods and services at constant prices...

...But what does it do for an encore...

...Rusher begins his argument by giving us a historical background of the two-party system and taking us on a guided tour through that system from Roosevelt up through Ford's selection of Rockefeller...

...We, therefore, are recommending that the Cost of Living Council place raw agricultural products under control so that the Commission may adopt measures to control food prices at each level of the production and distribution process...

...In this context, I know of no sound analysis that could attribute the cause of inflation to "structural blocks, business and labor power, or devaluation" unless these "causes" were themselves in perpetual, unidirectional change...

...and (4) "a strikingly weak leadership and organizational structure in the party to be replaced...

...In a press release he stated: "It is much too early to claim a victory over inflation...

...Fortunately, such "appropriate action" was neither authorized nor taken...

...Or on inflation...

...In other words, the Commission's price controls were ineffective in the face of market supply and demand forces...

...The preface to Confessions reads: "There is no analysis [in the book] of whether inflation was caused by excessive money supply, fiscal irresponsibility, business and labor power, devaluation, new social contracts, or a combination of these factors...

...Hence to avoid association with and responsibility for the certain results, McCracken and Stein opted to leave Grayson and his colleagues on their own to conjure up some treatment for the symptoms, rather than the causes, of inflation...

...Th verbalists (bureaucrats, academics, th media and foundation types) collect th taxes from the producers (blue colla...

...Thelast sentence of the paragraph is instructive...

...first reached the capitol to assume his duties as chairman of the Price Commission under Phase II, he was granted interviews with Paul McCracken and Herbert Stein of the Council of Economic Advisers...

...Since prices of particular commodities change relative to one another as tastes and technology change, we reserve the term inflation for persistent increases in the general price indices—the consumer and the wholesale price indices...

...How well did the Commission carry out its mission...

...Isn't it astonishing that the chief official economists of the government would so casually wash their hands of responsibility for the most abrupt and radical shift in economic policy in the last twenty-five years—the imposition of wage and price controls...

...He ha first-hand knowledge and experience o the effects of controls and a clear memor' of the popular clamor for them...

...When faced with the alternatives of carrying on the charade of "fighting inflation with price controls" versus rejecting the appointment because the charge was silly, illogical, and preordained to failure, which would you choose...

...Theuncertainty associated with inflation is perhaps more serious than is the warping influence of an anticipated, steady rate of increase of prices...

...Ink Review/IL ware Mows Mission Impossible • When C. Jackson Grayson, Jr...

...When next year rolls around the firm finds that it is already pricing for maximum profit...

...He is not optimistic...

...Although the government finds it politically convenient to blame business and labor for inflation, there is no theoretical basis for this argument unless the power of the two groups is continually increasing...

...It doesn't take an economic expert to predict that if the Price Commission had frozen the price of lettuce at 25 cents a head, the product would have disappeared from grocery produce shelves...

...Early in the Commission's experience "the lettuce crop in California had suffered from bad weather, and prices ballooned to 40 cents, 50 cents, even 69 cents a head in some parts of the country...

...The "cost-push" variation on this theme is really no different...

...These are largely one-shot affairs where relative Confessions of a Price Controller by C. Jackson Grayson, Jr...

...Higher short-term rates lead to higher long-term rates which, in turn, reduce investment, production, and consumption, and increase unemployment...

...But when the Food Price Index rose at a lower rate (from a 1.8% increase in February down to a 0.2% increase in March), Commissioner Grayson was elated and celebrated with several martinis...

...The only flaw in his presentation is that it contains few examples of the numerous shortages that appeared, no discussion of the "new products" artificially created, and no treatment of the effect the controls had on emerging firms and on the introduction of genuinely new products...

...The coalition of interests—Rusher cal it the Great Coalition—is all-importan For Rusher identifies the tradition economic conservatives and the Walla( "social" conservatives as a single grout capable, the argument goes, of being pe suaded to vote together...

...And there is no empirical evidence that this has been the case...

...If the government's desire to spend exceeds its willingness to tax, it will borrow to finance its deficit by selling bonds...

...Book Review/Daniel Oliver The 59 Percent Solution • A William A. Rusher's compelling new book, even if it is 179 degrees off course, will do great service for the conservative cause by forcing politicians to worry about conservative voters...

...Any further increase in prices will lead to reduced sales and profit...

...The Making of the New Majority Party by William A. Rusher Sheed and Ward $6.95 It is no secret, Rusher shows, that the Republican Party appears moribund...

...Then he posits four requirements for replacing a major party: (1) A basic issue (like slavery in 1856) that divides at least the party to be replaced and probably the other one as well...

...Let's look at food prices, for they affected everyone and consequently generated the most attention and criticism by the public...

...The rate of change in prices, while always positive in an inflation, may fluctuate widely—five percent this year, ten the next, and who knows what after that...

...However, there is sufficient narrative to convince the reader that the Price Commission did not base its policies and directives on economic models or econometric studies: "At the Price Commission we operated—I think fairly successfully—without getting the data we 'should' have had, without using any explicit decision tools, without formally consulting a management scientist, and without building models of our decision process...

...His un qualified arguments against control would have been more forceful had h supported them with specific cases...

...The Price Commission, by its own admission, was not in possession of such intelligence and techniques...

...Since many, if not most, of the issues do bated by the Price Commission were is sues of principle requiring a yes or n rather than a compromise decision, it' difficult to imagine an alternative prt cedure that would lead to a lower-qua ity common denominator in decision mat ing...

...Even the most ardent advocates of central direction of resource allocation admit that their schemes would require enormous amounts of information and data as well as sophisticated models and decision making criteria...

...By the middle of June the Food Price Indicators were moving up again...

...I do not...

...According to Grayson, their advice was: "Not much in classical economics seems to be working, why don't you come up with something on your own rather than be prejudiced by our views...

...When the commissioners did consult with professionals they apparently received advice consistent with their casual approach to the problem: "I gathered about ten economists from Harvard College and the Harvard Business School, and their advice was to crack down harder on profits—not necessarily because they wanted to hurt business, but because they felt it was essential to keep public support, to hold labor to their 5.5 percent, and to hold down prices...

...Professor Grayson offered the opinion that his task was not unlike an episode from Mission Impossible...

...wherever the impetus for wage and price increases comes from, they must be validated by an increase in the money supply...

...with Louis Neeb Dow Jones Irwin $9.95 prices change and the general price in dices move to a higher level after the system has completed its adjustment...

...True to its promise, the book does not contain such a discussion, perhaps because the Commission never had the inclination or the time to develop such an analysis...

...Inflation, by definition, is a persistent increase in the prices of goods and services...

...Is economic theory, classical or not, silent on the subject of controls...

...2) a "fresh impulse" reflecting a firm viewpoint on that issue...

...A staff report stated: "The price of ready-toslaughter cattle has surpassed the February 1971 level and has now reached a 21-year high...

...Price indicators will continue to fluctuate up and down, but I feel that the March indicators The Alternative: An American Spectator August/September 1975 31 are encouraging and offer a hopeful sign that we are moving toward our goal...

...once the force of the initial shock is spent, the general price level should not continue to rise...

...It is also recommended that appropriate action be taken by the Council to alleviate the shortage of supply...

...If it seems peculiar that the economists on the Commission did not persuade their colleagues to direct their efforts to the causes rather than the results of inflation, remember that, by design, the Commission had absolutely no control over those policy variables that could with appropriate manipulation end the inflation...

...Instead, the emphasis was on "action, speed, good sense, equity, energy, intelligence, dedication to excellent results, and a clear sense of the importance of the mission...

...Inflations are inextricably linked to changes in the money supply...

...But in order to sell increasing amounts of short-term maturities, the government must accept a deeper discount on the bonds and, consequently, short-term interest rates rise...

...Close your eyes, get a friend to read from it, and you will have no doubt that this is the conservative advocate arguing, trenchantly as usual, that (a) the Republican Party not just is, but will continue to be, ineffective in bringing to pass conservative policies and (b) that a new party would be more likely to accomplish the conservatives' goals...

...Given that deliberate action by the monetary authority is a necessary condition for perpetuating (and terminating) an inflation, the Price Commission's preoccupation with ad hoc measures is not surprising...

...The producers also share not economic beliefs in opposition to the not producers: they believe in a strong d( fense, a moral atmosphere (e.g., pray( in schools, no pornography) with at lea the blessing of government, the absent of such social tinkering as busing, etc...

...for example, the Commissio decided at the outset that "Votes woul not be taken until it was clear that w could not find a consensus position...

...The euphemism "appropriate action" can only mean command economy methods wherein all resources are directed to various uses by fiat of the government bureaucracy...

...Only days before Nixon announced the wage and price control program in August 1971, Council chairman McCracken issued an eloquent statement against the adoption of such measures...

...Spill a little capitalist blood,' one recommended...

...Grayson's account of the planning, organization, and day-to-day operations dramatizes their concern with the symptoms rather than the causes of inflation...

...And clearly some nominal members of the Republican Party (e.g., Javits) would be happier if they were to follow some of their erstwhile party colleagues (Lindsay, Reid) into the Democratic Party...

...white collar, salaried, entrepreneurs skim off their own salaries, and pass o the balance to a huge welfarist cot stituency...

...But then again, Grayson says th book is an account of "what happene when an 'economic jury' [the Price Con mission} got together—a lawyer, an ai countant, two economists, a busines school dean, a businessman, a politicia —and substituted their collective judf ment for that of the marketplace...

...To be more specific, if a firm acquires additional "monopoly power," it can raise its prices to capture the newly available monopoly profits...

...But it is the "basic issue" that is key and, in a thesis he shares with Jeffrey Hart and Kevin Phillips, Rusher says that that issue is the division of the country into two groups, producers and non-producers, with the country, of the prt ducers so to speak, being run by the nor producers for the nonproducers...

...it demonstrates clearly that even the commissioners realized that price controls were impotent in the absence of additional controls over output and, by implication, inputs as well...

...Now to the heart of the matter...

...One-time increases in particular prices, like last year's hike in petroleum prices, are not usefully categorized as inflation...

...I wonder what advice Grayson would have received from Harvard economists who do want to hurt business Grayson's Chapter 11 contains hi: assessment of the general impact of prici controls and his worried projections fo the future of a free society with such con trots...

...I infer that the members of the Council likely opposed the control program and surely understood the impossibility of administering it without inefficiencies, disruptions, inequities, and the loss of personal freedom...

...Similar reports were made for pork, fruits, and vegetables and "predictions were that prices would continue near present levels, or even go higher...

...It gets only a courtesy rating in the polls...

...Whether the Commission attributed the price changes to random events or whether they realized that the movements were caused by market forces, the futility of their control techniques is illustrated by the following passage from their open letter to the Cost of Living Council late in June: "While the [food price] problem has been caused by the natural forces of supply and demand, the Commission feels that immediate action must be taken to prevent further price increases...

...In a recent pot 59% of the voters described themselvi as, in some sense, conservative, but-and the future, very likely, of the co servative cause and the fate of the natic hang in the balance—whether they w 32 The Alternative: An American Spectator August/September 19i...

...3) a "counter-tendency" among some members of theparty to be replaced causing them to seek happiness in the other party...