Indianapolis, IN: Liberty Fund, Inc.
Liberty Fund, Inc.
ON MONEY AND INFLATION
Part VI, Introduction
In this section, I deal with that most ubiquitous of all diseases of economic life: inflation. As Lenin predicted, it is fast becoming the instrument of the disintegrating process in capitalist economies—though its ravages are equally visible in the socialist economies of the world.
The first paper is one version of a long-run-economic-outlook speech that I have been giving to various groups for a number of years. Given the bleakness of the outlook presented here, I wish that I could report that events have given the lie to my prophecies, but such does not seem to be the case.
The second paper, "Alleged Causes of Inflation: Corporate Monopolies," was presented in March 1976 at the fourth annual conference of the Committee for Monetary Research and Education, held at Arden House, Harriman, New York.
Part VI, Chapter 1
The Long-Run Economic Outlook
The most probable course of events in the American economy in the next ten to fifteen years is the following: (1) continuing, in fact, accelerating inflation; (2) no major depression, but occasional periods of reduced real output (and hence employment); (3) off-and-on price and wage controls; (4) a rising pattern of interest rates; (5) an increasing direction of private economic activity by public agencies; and (6) an increasingly hampered economy, with an associated decline in its efficiency and its capacity to produce economic growth. The most probable final outcome of all this is that the American economy will come to look very much like the English economy of today, an economy that one English observer has described as "sinking slowly under the sea, giggling as she goes down."
The reasons for this probable course of events are many and complex. However, many of those reasons relate to what I believe to be serious misconceptions about what inflation is, what causes it, and what it can and cannot produce.
Misconceptions about Inflation
(1) The primordial sin in treating of inflation is that of assuming that interest rates can be kept at some desired level (usually "low") by increasing the money supply, i.e., by an easy money policy. It is typically argued that high interest rates reduce investment, curtail output, reduce home building, penalize the debtor-poor to the advantage of the creditor-rich, etc., and that low interest rates are clearly to be preferred to high. This argument is filled with dubious connections, but the real trouble flows from the attempt to implement its thesis by means of continuous inflation.
The fact of the matter is that the level of interest rates is a market phenomenon, and not only is it undesirable for government to seek to control it but it is largely impossible for it to do so as well. It is true that by adding to or subtracting from the rate of change in the money stock, temporary changes, particularly in short-term rates, can be achieved—and this illusion of effectiveness is the precise source of the problem. Suppose for example that the monetary authority (i.e., the Federal Reserve System) were to bring about a significant injection of new money into the economic stream over a short period of time. The point of impact of the injection would normally be the short-term money market, and the rather immediate consequence would be a fall in the short-term rate of interest. However, over the course of the next few months, as this new money churned through the economy, there would be a tendency for spending of all kinds to increase, with consequent upward pressure on prices. This in turn would lead both businesses and individuals to wish to spend more now, to build up inventories or undertake expansion of plant, or buy durables and homes now before prices go even higher. This increased propensity to spend would be translated into a sharply increased demand for loanable funds. This in turn would mean that the original increase in the quantity of money would be offset by the increased demand for loanable funds, and interest rates would start to climb. Moreover, as potential lenders would see prices rising, they would insist on an inflation premium in the interest rate; in other words, the supply curve of loanable funds would shift up and to the left, indicating that it would now take a higher rate to bring forth a given volume of loanable funds than was true before.
But why can't this countering effect be matched or more than matched by continuing injections of new money? Because this would mean continuing inflation and this in turn would mean a demand by lenders for an even higher inflation premium on interest rates.
To try to cure the problem of high interest rates by increasing the quantity of money, i.e., by inflation, is like trying to cure a hangover by some "hair of the dog" the next morning. The temporary feeling of wellbeing is closely followed by a renewed attack of the problem; the alleged remedy is in fact not a cure to the problem but its precise cause. It is inflation that causes high interest rates, not the reverse, the Honorable Wright Patman to the contrary. There is one way and only one way to bring the market rate of interest back to the levels we tend to think of as normal, and that is to take the inflation premium out of interest rates by taking the inflation out of the economy—and there is only one way to do that, and that is by keeping the quantity of money from going up faster than the output of goods and services.
(2) A related misconception is that it is possible to trade off any given degree of inflation for corresponding levels of unemployment, i.e., that we can purchase whatever level of unemployment we think bearable or desirable by paying the cost in the form of some predictable level of inflation. (This is the famous Phillips Curve hypothesis of recent fame.)
It can be demonstrated that this is true only if the specified level of inflation is unanticipated by the economic units in the society. Thus an unanticipated rate of inflation of 5 percent may be consistent in a given economy with a 3 percent level of unemployment. But of course a continued rate of inflation of 5 percent soon comes to be anticipated by wage earners, lenders, and others in the economy; this in turn will lead them to demand an inflation premium in their wage rates, interest rates, etc., and the changing cost structure, given no change in the rate of increase in the money supply available for spending, would produce reduced outputs and rising unemployment. When this happens, the 5 percent rate of inflation comes to be associated with a much higher rate of unemployment, say 6 percent. To bring the rate of unemployment back to 3 percent would now require an additional and unanticipated inflation factor of (say) another 5 percent, for a total rate of inflation of 10 percent. In other words, as for the drug addict, ever increasing dosages come to be necessary to achieve any given level of "high" or feeling of well-being. Any attempt to maintain unemployment at some given, desired level by the means of a continuously easy money policy must mean not just continuous but accelerating inflation.
(3) Another related misconception can be handled very quickly. It is the belief that the liquidity problems of individuals, businesses, government, and whole nations can be cured by increasing the supply of money within nations and worldwide. An economic unit can be said to face a liquidity problem wherever it can make necessary borrowings only at interest rates that are inconsistent with other parameters in its system, e.g., the family's income available for payments on interest and principal, or the prices the business firm can charge for its product, or the level of taxation a political unit feels it can impose on its citizens, or the interest payment outflow that a nation's balance-of-payments position would seem to tolerate. The fact is of course that it is inflation itself which tends to produce this seemingly universal illiquidity. Borrowers are tempted to borrow for the very good reason of buying now before prices go even higher; lenders are tempted to lend by the ready insistence of borrowers and the rising charges they can impose on loans. One special feature of this process deserves mention here. In those periods of time when an easy money policy has brought about a temporary lowering of the short-term rate relative to the long-term, those institutions which tend to borrow short and lend intermediate and long tend to expand both their borrowings and their lendings. When the inevitable rise in the short-term rate comes, they then find themselves with a most embarrassing problem of liquidity. At this point they never cease to cry aloud for a new injection of money to save them from a liquidity crunch or crisis. Again the proposed remedy for the ailment turns out to be that which brought the ailment in the beginning and also that which is certain to produce a recurrence of the ailment at a later date.
A liquidity problem, whether it be for Joe Doaks and family, the Widget Manufacturing Company, the First National Bank of Everywhere, the U.S. Government, or the countries of India, England, Italy, and Japan, can never be solved by inflation, by creating more dollars or more pounds or more yen or more SDRs. The temporary relief so gained is purchased at the price of a certain recurrence of the disease, and in a more virulent form.
(4) Another misconception is that inflation is caused by something other than the money relationship and that it can be stopped by doing things other than that of bringing about a proper relationship between the stock of money and the output of goods and services.
One form that this misconception takes is the Keynesian one, the belief that changes in total spending in the economy are not as closely related to changes in the stock of money as to other variables, such as business and consumer propensities and the fiscal actions of governments. For example, in the mid-sixties, the Keynesians who were advising the Johnson administration assumed that in urging a more restrictive fiscal posture on the government, they had taken the important step in fighting the developing inflation and that they could then feel free to recommend a somewhat easier money policy. Although their advice was not followed in all details, the course of action was roughly what they called for—but the consequences were what Friedman and the monetarists were predicting, i.e., rising inflationary pressures under the influence of excessive monetary ease.
Another and more disquieting form that this misconception takes is what might be called the Galbraithian one. It is the belief that inflation is really produced through the domino effect of price and wage increases triggered by powerful business, labor, and farm groups in the economy. This point of view is supported neither by common sense nor theory nor the facts. Professor Paul McCracken once said of this idea that "it is still common among uneducated people. Galbraith's view is unusual only in being held by the president of the American Economic Association and in being described by him as new."
It is indicative of the nature of the problem we are facing that this self-same McCracken was to publicly defend a system of wage-price controls instituted by his president just three weeks after he, McCracken, wrote the above statement.
Strong groups within the economy may be able to divert spending in various antisocial ways but they cannot bring about an increase in total spending, which is what inflation is all about. Trying to stop inflation by wage and price controls is like trying to cure a fever by breaking the thermometer. The observed wage and price increases are but symptoms of the disease. The real problem is the heat in the body economic and this can be reduced only by reducing the rate of increase in the quantity of money.
(5) A final misconception about inflation is that it should be and is possible to stop an inflationary process without cost to anyone in society (except perhaps the very rich, who deserve their comeuppance in any case).
The fact is that once inflation lasts for any length of time, it will come to be anticipated in the decisions of a greater part of the society. If inflation is stopped, those anticipations prove to have been in error and the decisions based on those anticipations now have painful consequences: unemployment for the workers who had demanded the higher wages, losses for the firms who had contracted to pay the higher costs, financial loss to all who had purchased assets, directly or indirectly, in anticipation of rising prices, financial distress to all who had borrowed long-term money at high interest rates, etc.
The fact is that we can find not one single case of a society that has been able to stop an inflationary addiction without serious withdrawal pangs, in the form of higher rates of unemployment, lower real output, declining profits, etc. Moreover, the experience indicates that the longer and more rapid the inflationary surge, the more painful the withdrawal process.
We turn now to my not-so-Delphic forecast of things to come. We have before us most of the ingredients on which I base my specific predictions.
(1) We will have continuing, in fact accelerating inflation in the years ahead. Reasons: (a) It would be too painful to stop it. Not only would it be painful to many of the citizenry; because it would be painful to the citizenry, it would be political suicide for any administration that really attempted to do it. I am saying that I doubt if any administration could stay in power long enough (or continue to have power enough) to carry through to conclusion a really successful struggle to end inflation. (b) For the same reason, the administrations in power, of whatever political party, will find it necessary to move to a higher rate of inflation from time to time to avoid the letdown that continuing a fully anticipated rate of inflation inevitably brings.
(2) We will not have a major depression in the next two decades. No administration could tolerate it, and the alternative (a step-up in the rate of inflation) is much less dangerous, politically, than a major depression. However, because of the imperfect nature of all attempts at control and because of the necessity from time to time of taking half-hearted steps to slow down inflation, there will be occasional periods of recession. These will be marked by reduced rates of real growth, perhaps even negative real growth, higher unemployment, etc., but not by lowered levels of prices and wages. (The descriptive word is "stagflation"—stagnation with inflation.)
(3) We will have off-and-on wage and price controls. Too many people believe the Galbraith myth, and the pressure on administrations to do something (or to seem to be doing something) about inflation will bring recurring trials with direct controls. Each new return of controls will be greeted with huzzahs and cheers (even from the business community), only to fall victim to the inevitable frustrations and conflicts of the economic anarchy produced by those controls. Each repeal, though, will leave a larger part of the economy under some form and degree of direct controls.
(4) The combination of continuing (accelerating) inflation and on-again off-again controls will make it increasingly difficult for economic calculation to take place with any degree of efficiency. The subsequent inefficiencies, shortages, frustrations, and inequities will lead to increasing demands for even more detailed control of the private sector. In banking, this may well take the form of governmentally assigned quotas of lending to identified groups and for identified purposes at levels of interest rates well below market. This in turn will mean that the government will itself become an ever more important guarantor of loans and fund source of last resort.
(5) The increasing control of economic life by government can have but one effect on the vitality and strength of the economic process—and that is to sap the vitality and diminish the strength of the most productive economic system in the history of man. With the size of the pie growing but slowly or diminishing, the conflicts over its division will increase in intensity. As the English experience so clearly demonstrates, these conflicts (particularly in the form of labor disputes) can make the efficient functioning of an integrated economy virtually impossible.
All of this in turn will reduce the capacity of this country to compete in world markets. Our fate, as England's, will then be chronic balance-of-payments problems, continuing loss of faith in the currency in the world money markets, and periodic crises of increasing dimension. If this analysis be at all accurate, then we can say, with Archie the Cockroach, that there is indeed more reason to be optimistic about the past than about the future.
Notes for this chapter
Washington Post, July 28, 1971.
End of Notes
Part VI, Chapter 2
Alleged Causes of Inflation: Corporate Monopolies
The question before the house is whether inflation is caused, in whole or in part, by the exercise of private market power in the economy. So as to relieve what little suspense there may be, let me hasten to say that the answer to this question is "No." Inflation is not produced by the assistant manager of the A&P store who marks out 43¢ on the can of beans and replaces it with 47¢. Its source is not to be found in the executive offices of the major oil companies—nor even in the exotic, air-conditioned chambers of the oil ministries of the oil producing states of the Third World. Nor is it to be discovered in the admittedly disconcerting, often violent, actions of the minions of George Meany. Even the God of the rainfall, the wind storm, and the wheat rust is blameless of visiting this affliction upon us.
Where, then, must we look if we wish to find those who do in fact control the forces of inflation? To somewhat (but not too seriously) oversimplify, we need look no further than the Open Market Committee of the Board of Governors of the Federal Reserve System. Our fate is determined in the discussions and decisions of this group of reasonably intelligent, eminently well-meaning men of affairs.
Admittedly, these men do not make their momentous decisions in a policy vacuum. As a creature of the legislature, they are operating under certain legislative commands; even more importantly, they are operating in an environment of public opinion, public expectations, and even public clamor. To paraphrase Mr. Dooley, even the Board of Governors of the Federal Reserve System reads the election returns. Thus, if you believe as John Maynard Keynes, Richard Weaver, and I do that ideas do have consequences, that today's public clamor is in large part a product of the academic scribblers of years past, it is necessary to say that Open Market Committee decisions are only the proximate cause of the inflationary pressures of the day; the real roots of the problem (and the hopes for its solution as well) are to be found in the cluttered closets where people like John Maynard Keynes, Ludwig von Mises, John Kenneth Galbraith, Walter Heller, Milton Friedman, et al., go about (or have gone about) their work. The regression equations developed by the research staff of the St. Louis Federal Reserve Bank may well be some part of the ammunition that will eventually bring down the walls of the inflationists. In other words, it is ideas, whether right or wrong, that finally count, and one of the most important of the mistaken ideas to be disposed of is the one under discussion here: the idea that market power produces inflation and the corollary policy implication that inflation can be reduced or controlled by direct intervention in wage and price setting.
This call to intellectual and expository activity is really all that I have to pronounce here, but do not think that I shall relinquish the speaker's stand so quickly. My bald, unsubstantiated statements surely require some elaboration—and, in addition, I must at least seem to do more to qualify for the modest pay offered to speakers in these meetings.
Market Power and Inflation
The question of the relationship between market power and inflation can be disposed of quickly by definition alone—if one accepts what I believe to be the most useful definition of inflation. In the tradition of Mises, I believe the most useful way to define inflation is as a situation in which the quantity of money is increasing more rapidly than the output of goods and services (or, more precisely, than the corresponding need for money). The wage and price increases which tend to follow from this are but the symptoms of the situation itself. Thus, if by draconian measures, all the wage-price-interest rate symptoms of inflation could be suppressed, the inflation would still be present, but its symptoms would be in general (though not universal) shortages of goods and services—in queues before the shops of the butcher, the baker, and the candle-stickmaker. As Allen Wallis has pointed out, for the housewife to encounter bare shelves at the fixed price is for her to suffer a fall in the purchasing power of her money just as real as for her to encounter full shelves but at higher prices.
But doesn't the use of market power by large corporations or by small firms acting in concert or by trade unions lead to reduced output of goods and services, thus producing the Mises effect by its impact on the T element in the equation (MV=PT)? In a word, no. The exercise of market power can change (in fact, distort) the use of resources from what would have prevailed in the absence of that market power (e.g., fewer workers employed in construction and, because of that, more workers available for other employments). This could lead to some prices (housing, say) being higher than they would otherwise be, but, by the same token, other prices would be lower than they would otherwise be. There is indeed damage to the consumer interest from this state of affairs, but it is a damage different from (and to be corrected by different means than) the damage from inflation. In insisting that the bite of the rattlesnake does not cause cancer, I am not trying to say a kind word for the rattlesnake. I am only trying to direct the doctor to the correct diagnosis and medication of the ailment.
But suppose one does not accept the Mises approach to defining inflation; suppose one finds it more useful to define inflation as "generally rising prices" or some more precise form of the same idea. Can inflation, so defined, be produced by the exercise of market power? Even with this definition, I would answer in the negative. This definition, by the way, is roughly the one used by most of those who call themselves "monetarists," and who argue as I do that inflation is essentially a monetary phenomenon. Market power may indeed be used to cause some prices or wage rates to be higher than they would otherwise be, but if the total of dollars remains unchanged, this can in turn produce at worst a diverting of dollars from other goods and services, with associated downward pressure on the relevant prices and/or wage rates.
But can't market power at least influence the lag between disturbances in M and responses on the price and wage side? There is some evidence that this may indeed happen in some cases, but so what? It is still not the market power that has produced the inflation.
Now that I have mentioned "evidence," perhaps I should pay some attention to those of you who prefer something a little more concrete as an answer than warmed-over Mises. I freely admit that I have undertaken no rigorous research of my own on the question under discussion. What I have done is to read the reports from the research of my "betters." Not too surprisingly, what I find there tends to confirm my original presuppositions.
For the single best summary of research findings (including his own) I suggest that you turn to a monograph by Steven Lustgarten of City University of New York, published by that most useful organization, the American Enterprise Institute. The title is Industrial Concentration and Inflation, and it includes a foreword by Yale Brozen of the University of Chicago, research director of the American Enterprise Institute (and incidentally the man who first turned my own eyes in the direction of market economics).
Brozen summarizes the findings in his foreword as follows:
It is frequently argued that industries in which a few firms produce most of the output charge higher prices than they would if the large, component firms were broken into several smaller ones (as was done, for example, with the old Standard Oil Company and the American Tobacco Company early in the century). Whether or not the argument is valid, and much evidence to the contrary has appeared, it does not follow that inflation is a consequence of a highly concentrated industrial structure. Assuming, for the sake of argument, that concentrated industries charge higher prices, we should suffer rising prices only if industrial concentration were rising. But data for the U.S. economy show average market concentration levels to be fairly stable. That being the case, no connection should be expected between industrial concentration and inflation.
Professor Lustgarten examines the movement of prices of manufacturing industries. He seeks to determine whether prices in the most concentrated industries increase more rapidly than those in the less concentrated industries. He finds that the price behavior of the highly concentrated industries has not been a source of inflation in the United States. According to his data, the prices of these defamed industries have not only not been a source of inflation, but have risen more slowly than those in the atomistic industries. They have, in fact, been a moderating factor in inflation.
Lustgarten's own summary runs as follows:
Both theoretical and empirical evidence relating industrial concentration to inflation have been examined. The theoretical arguments were that concentration promotes inflation because it allows sellers to maintain prices when demand declines, to pass on inflationary wage increases, and to avoid competitive pressures to reduce costs. These arguments were found to be inconsistent with the evidence, which showed that prices and unit labor costs have increased more slowly in concentrated industries than in other industries.
Admittedly, what Lustgarten and others have done is largely to show that there seems in fact to be no relationship between industrial concentration and inflation—and this is not equivalent to proving that there is no relationship between market power and inflation. Their findings may only suggest that there is no real relationship between concentration ratios and the real exercise of market power—a thesis I believe to be almost certainly valid.
As a matter of fact, it is my firm conviction that neither concentration ratios nor market shares nor profitability nor any of the usual criteria of imperfectly competitive markets are of any significance to economic performance. To put it another way, I believe that the only meaningful definition of monopoly is that of a position in a market maintained by the use or threat of the use of force. Most commonly, the kind of use of force I have in mind is technically legal, i.e., it comes directly from governmentally enforced barriers to entry or to free market pricing as in plumbing or banking or doctoring or what have you. But it is sometimes in the form of a permissive attitude on the part of those charged with maintaining the peace towards the use of violence by private groups, such as dairy farmers or automobile workers or carpenters.
I intend to return for final comment on this topic in the next section. At the moment I wish to deal with the question of whether or not the exercise of this kind of real market power might not be related to inflation. To the disappointment of many of you, I suspect, I must reply that it is my firm belief that not only can Gulf Oil and General Motors not produce inflation but neither can it be "manufactured" in the regulatory offices, the tariff commissions, the city halls, or the courts of the land. Again actions taken (or not taken) there can, like the rattlesnake, introduce a poison into the economic system, but the poison is not that of general inflation.
Here, in part at least, I must disagree with a man whose work I hold in highest esteem, Professor Murray Weidenbaum. Here are his words:
As the American public is learning to its dismay, there are many ways in which government actions can cause or worsen inflation. Large budget deficits and excessively easy monetary policy are usually cited as the two major culprits, and quite properly. Yet, there is a third, less obvious—and hence more insidious—way in which government can worsen the already severe inflationary pressures affecting the American economy.
That third way is for the government to require actions in the private sector which increase the costs of production and hence raise the prices of the products and services which are sold to the public.... Literally, the federal government is continually mandating more inflation via the regulations it promulgates. These actions of course are validated by an accommodating monetary policy.
In theory, the monetary authorities could offset much of the inflationary effects of regulation by attempting to maintain a lower rate of monetary growth. In practice, however, public policy makers, insofar as they see the options clearly, tend to prefer the higher rate of inflation to the additional monetary restraint and the resulting decreases in employment and real output.
Weidenbaum notes that the actions he describes require the validating influence of a more rapid rate of increase in the quantity of money to produce their inflationary effects, an admission usually made as well by those who argue that union action does indeed lead to inflation. But here again I would object; if there are no more dollars floating around, the primary effect of government regulation (whether wise or unwise) will be to divert those dollars from one channel to another, with price increases in some areas and price decreases in others, rather than to produce general inflation.
Can Inflation Be Cured by Making the Economy More Competitive?
The heavy emphasis I put upon this point seems to me to be necessary and appropriate. While it is true that the Weidenbaum-type argument may strengthen the case for a long-overdue dismantling of many parts of the regulatory apparatus (a consummation devoutly to be wished), the general argument linking market power to inflation is also being used by such men as Senators Hart and Bayh to propose structural changes in American business that would bring in turn a sharp reduction in the economic well-being of the masses of the people.
As a matter of fact we have been saved from this fate over the years, under the existing legislation, because of a largely tacit recognition by the political leadership of the nation that antitrust makes for great rhetoric but lousy economics. I am absolutely serious when I say to you that I believe the antitrust laws to be in direct opposition to both the spirit and the practice of capitalism. The very criteria by which a businessman measures his success in serving his stockholders and his customers—increasing share of the market, industry leadership, superiority in product and processes over rivals, above-average profitability—are often precisely the same criteria used by the antitrust division of the attorney general's office as evidence of noncompetitive markets. Or, to put it another way, how can we label as "unjust" a position in the market that has been achieved over time through a series of peaceful, non-fraudulent exchanges with willing partners?
It is my firm conviction that Schumpeter was absolutely right when he argued that "the power to exploit at pleasure a given pattern of demand ... can under the conditions of intact capitalism hardly persist for a period long enough to matter ... unless buttressed by public authority."
It is my belief that competition inheres in the very nature of man and the exchange economy; in the words of Adam Smith, "All systems of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord." Competition does not need to be created or protected or restored; all that government need do to see that competition prevails is not to get in its way.
My position here is very similar to that taken by Joseph Schumpeter (and by Mises as well), but I was not brought here to discuss with you the various views on the meaning and nature of competition and monopoly. My assignment was to discuss the question of whether or no the problem of inflation was significantly related to the exercise of market power in the economy.
To summarize, I have argued that market structure and performance are not significantly related to the problem of inflation. It follows from this that inflation cannot be reduced or eliminated by actions taken to make the economy more competitive. Moreover, I have insisted that for the nation to turn its policy eyes in that direction would be for it to divert attention from the only area where it must look if it is in fact to bring inflation under control—and, in the process, to be as likely to produce harm as good in the market structures of the economy. Finally I have identified that "only area" where a solution to the problem of inflation is to be found as that of the money supply.
This leaves unresolved all of the really important questions! What is the objective to be sought in the making of monetary policy? No increase in M, however defined? a steady rate of increase? is the proper dial to be watched M1 or M2 or M3? Should all such attempts to create a controlled paper currency be abandoned and replaced by the gold standard? If so, which of the many forms of the gold standard? or should some other commodity standard be put in place?
These are the topics with which other speakers are concerning themselves, and they are not a part of my assignment. However, in closing, I cannot resist offering two comments:
(1) Turning the control of the money supply over to government, under any conditions, is like turning the liquor store over to an alcoholic; and
(2) I do not believe that any expert or group of experts can possibly devise a monetary system as effective as the one that would spontaneously emerge in a society in which the government played no more and no less of a role with reference to money than I would have it play in all of economic life: maintain law and order, enforce contracts, and stand ready to assist the plaintiff in cases of fraud. In money as elsewhere, I prefer the rule of the market to the rule of men.
Notes for this chapter
Steven Lustgarten, Industrial Concentration and Inflation (Washington, D.C.: American Enterprise Institute, 1975), p. 1.
Here again Brozen is a useful source; see his "Concentration and Profits: Does Concentration Matter?" in Brozen, The Competitive Economy (1975).
Murray Weidenbaum, Government Mandated Price Increases: A Neglected Aspect of Inflation (Washington, D.C.: American Enterprise Institute, 1975), p. 3.
Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, 3rd ed. (New York: Harper & Row, 1962), p. 99.
Adam Smith, The Wealth of Nations
(New York: Modern Library, 1937), p. 651.
End of Notes
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