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A Theory of Price Control
New
- GenresEconomics
Hardcover
First published February 5, 1980
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About the author
John Kenneth Galbraith
217 books520 followersJohn Kenneth Galbraith was a Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism and democratic socialism. His books on economic topics were bestsellers in the 1950s and 1960s. A prolific author, he produced four dozen books & over a 1000 articles on many subjects. Among his most famous works was his economics trilogy: American Capitalism (1952), The Affluent Society (1958) & The New Industrial State (1967). He taught at Harvard University for many years. He was active in politics, serving in the administrations of Franklin Roosevelt, Harry Truman, John Kennedy, and Lyndon Johnson. He served as US Ambassador to India under John F. Kennedy.
He received the Presidential Medal of Freedom twice: one in 1946 from President Truman, and another in 2000 from President Clinton. He was also awarded the Order of Canada in 1997, and in 2001, the Padma Vibhushan, India's second highest civilian award, for strengthening ties between India and the USA.
He received the Presidential Medal of Freedom twice: one in 1946 from President Truman, and another in 2000 from President Clinton. He was also awarded the Order of Canada in 1997, and in 2001, the Padma Vibhushan, India's second highest civilian award, for strengthening ties between India and the USA.
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Displaying 1 - 2 of 2 reviews
April 25, 2020
Clarifies a great deal about how wartime planning in capitalist states worked, and why it was necessary - something I've seen demonstrated and acknowledged elsewhere "in practice," as it were, but hadn't seen an account of, except in the most partial respects. Briefly:
1) The theoretical basis for price control in oligopolistic markets, in general, applies - and oligopolistic markets are also easier to regulate in this way than competitive markets would be. Further, under conditions of economy of scale price controls are consistent with expanding output.
2) Under conditions of total factor mobilization, the normal constraints on factor price expansion (reserve army of the unemployed, etc) disappear. Thus it becomes necessary especially necessary to constrain the wage bill.
3) Since discretionary consumption goods are set aside to transfer to war production, demand almost necessarily outstrips supply leading to inflationary pressures that would try to "correct" this; inducements to (e.g.) wages must come in the form of future opportunities for spending (after the war), thus, a general belief that the war is winnable and that savings will not be wiped out by inflation becomes necessary to effective inducements to perform extra labor.
4) In order to control the wage bill, even competitively produced commodities (such as clothing and food) must be subject to rationing and price controls; the difficulty in doing so forms part of why these were the most prominent features of black markets. Further, items not part of the wage bill must be subject to some price controls lest their growing comparative price cause distortionary movements of production towards them - absent war goods, which one wants to grow anyway, and which in any event are controlled by the government's monopsony power.
Parts of this may be ultimately wrong or at least debatable, but for historical purposes, the fact that they reflect how many economists thought of the problem (though Galbraith emphasizes that in large part economists largely had to grasp towards correct action and then theoretically understand it only afterwards) makes it of historical interest even so. Further, the sections especially on "partial mobilization" may be of contemporary interest re: projects like the Green New Deal, although as he emphasizes the role of institutionalized wage negotiations, institutions that have now largely disappeared from American economic life, there are some limitations to its applicability.
1) The theoretical basis for price control in oligopolistic markets, in general, applies - and oligopolistic markets are also easier to regulate in this way than competitive markets would be. Further, under conditions of economy of scale price controls are consistent with expanding output.
2) Under conditions of total factor mobilization, the normal constraints on factor price expansion (reserve army of the unemployed, etc) disappear. Thus it becomes necessary especially necessary to constrain the wage bill.
3) Since discretionary consumption goods are set aside to transfer to war production, demand almost necessarily outstrips supply leading to inflationary pressures that would try to "correct" this; inducements to (e.g.) wages must come in the form of future opportunities for spending (after the war), thus, a general belief that the war is winnable and that savings will not be wiped out by inflation becomes necessary to effective inducements to perform extra labor.
4) In order to control the wage bill, even competitively produced commodities (such as clothing and food) must be subject to rationing and price controls; the difficulty in doing so forms part of why these were the most prominent features of black markets. Further, items not part of the wage bill must be subject to some price controls lest their growing comparative price cause distortionary movements of production towards them - absent war goods, which one wants to grow anyway, and which in any event are controlled by the government's monopsony power.
Parts of this may be ultimately wrong or at least debatable, but for historical purposes, the fact that they reflect how many economists thought of the problem (though Galbraith emphasizes that in large part economists largely had to grasp towards correct action and then theoretically understand it only afterwards) makes it of historical interest even so. Further, the sections especially on "partial mobilization" may be of contemporary interest re: projects like the Green New Deal, although as he emphasizes the role of institutionalized wage negotiations, institutions that have now largely disappeared from American economic life, there are some limitations to its applicability.
April 12, 2008
It was nice to pick this up again after so many years away from it. An excellent exposition on the theory of why price controls need to be considered during wartime economies to aid everything from production for war and domestic use to maintianing prices so that these goods can be obtained. It is interesting to see views from a time when production and availability weren't as stable and seemingly guaranteed as they are today. Galbraith's work is an attempt to spell out the needs for identifying what must be maintained and how that can best be achieved for both war and domestic purposes. We wouldn't think this way today, but our economic and industrial complex are in a much different place than they were back then.
Displaying 1 - 2 of 2 reviews