The Freeman 1972 - The Ludwig von Mises Institute

PAUL L. POIROTA PECULIAR tendency of thinkinghuman beings is to behave, notnecessarily in response to the factsof a given·· situation, but in responseto what they believe is thesituation.Men who believe there are differentkinds of inflation may beconvinced that different cures areneeded. For instance, if it is a"cost push" inflation, and highwages are believed to be the costof production most responsible forthe extra push, then the obviouscure would seem to be a rollbackor other control of wage rates.Or, if high profits are believedto be responsible for pushingprices upward, then the most likelycure would be an "excess-profits"tax or some such limitationof profits.The latest new kind of inflationis alleged to be "social inflation"- due to the extra expense ofcleaning up air and water, fostering"consumerism,"· meeting othersocial goals. And when the doctorsof the sick body politic get aroundto it, they might possibly come tobelieve that the cure for social inflationis to clamp a lid on Federalspending.In view of the widespread disagreementabout the facts concerninginflation in the UnitedStates of America in 1972, let usimagine a comparable situation atsome other time and place. Let'ssay it's the year of the millenniumin Utopia and see if we can visualizethe facts. Let's furtherimagine that the residents ofUtopia are as bright on the wholeas weare, living under what isgenerally described as a free marketeconomy with quite a lot ofgovernment intervention.For the sake of simplicity let'ssay that about a. third of the laborersin Utopia are members of aunion under the leadership of Mr.