The Affluent Society

by John Kenneth Galbraith

Thus, by way of illustration, farmers have little or no control over the prices at which they sell their products. Inflation reaches them by way of impersonal market movements. For the wheat or potato farmer, the income elasticity is very low—as wage incomes rise, individuals spend no more for bread or potatoes and, on occasion, spend less. Meanwhile, the farmer’s costs of fuel, fertilizer and other factors from the oligopolistic sector of the economy will have risen. For the beef-cattle producer, by contrast, income elasticity is rather higher. He is the beneficiary of the well-known and statistically quite demonstrable tendency of people who have an increase in pay to celebrate with red meat. Other things being equal, and in the cattle business they frequently are not, his position will be happier than that of the producer of bread grains or potatoes. Such discrimination is pervasive. The individual or firm which, either in line of business or as the result of speculative acumen, holds large unhedged inventories, benefits from the increased demand for these and from the consequent increase in price. At the other extreme are those who experience the rising costs but whose own prices remain largely unaffected because they are fixed by law or custom or, at a minimum, by someone else. This is the position, during inflation, of the teacher, preacher and other of the white-collar community and of those who are reaping the reward of past services to society in the form of pensi...