Should We Accept Inflation?

Under conditions existing in the American econ omy today, there are periods when it is extremely difficult to achieve simultaneously the two major goals of high employ ment and stable prices. Abandonment of the goal of price stability is not an acceptable solution to this problem—first, because reasonable price stability is essential to a just distribu tion of output, and second, because it would be even more diffi cult to maintain high employment under a conscious national policy of inflation than under a policy directed toward stable prices. Under every assumed rate of inflation, the monetary and fiscal authorities would again be faced with exactly the same dilemma. The goal of stable prices would have been sacrificed only to find that nothing had been gained with re spect to employment and output. As in the case of most di lemmas, the solution is found by restating the problem: it is not stable prices and high employment which are incompatible; it is unrestrained monopoly power and high employment which are incompatible. The acceptance of inflation will not solve the problem. High employment and an equitable distribution of output can be maintained only by taking steps to restrain monopoly power, wherever it may exist in the economy.