Policy Against Inflation: Manpower Policy

In the previous chapter prices and incomes policy was viewed as an approach to the control of inflation which works, if it works, by so modifying the structure of the model that the rate of inflation is less, for given values of the data, than it would have been otherwise. Regarded in this light, prices and incomes policy has one very special feature. The essence of prices and incomes policy is that price-makers and wage-setters are required, or urged, to conform to a code of behaviour which the authorities have laid down. Presumably the behaviour which is being looked for is not the behaviour which price-makers and wage-setters would adopt if left to their own devices; for if it were, there would be no need to impose, or urge, this behaviour on them, and prices and incomes policy would be an entirely pointless exercise. The special feature of prices and incomes policy, then, is that it attempts to bring about the intended favourable modification of the structure by forcing, or persuading, economic agents to behave in a manner which, as they see it, is opposed to their own best interests. In short, prices and incomes policy is a means of modifying the structure of the model which works against market forces, rather than with them.