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- | Welcome once again, as MIT professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This series is produced by | 0:08 | |
Instructional Dynamics Incorporated. | 0:09 | |
This program was recorded September 10th. | 0:11 | |
- | The news has been coming thick and fast. | 0:16 |
Today, I'd like to report on the first summit meeting, | 0:19 | |
the first preparatory meeting for the summit | 0:24 | |
called by President Ford for the major, grand, glorious, | 0:28 | |
1,500-person summit which will meet | 0:36 | |
at some Washington hotel at the end of this month. | 0:41 | |
On Thursday, September 5th, 28 outside economists | 0:45 | |
were invited to meet in the east room of the White House | 0:51 | |
with President Ford, with his economic advisors, | 0:54 | |
Chairman Alan Greenspan newly appointed | 1:00 | |
to the Council of Economic Advisors, | 1:03 | |
being in the chair for most of the day | 1:05 | |
when the president wasn't there. | 1:07 | |
But included at the table were | 1:09 | |
Roy Ash, the director of the Office of Budget Management, | 1:12 | |
William Simon, Secretary of Treasury, | 1:19 | |
all the other economists, Dr. Fellner of the CEA, | 1:23 | |
Dr. Seevers, and so forth. | 1:28 | |
But also, and this was therefore | 1:30 | |
to be not just an executive branch meeting, | 1:33 | |
but a combined operation, a honeymoon coupling | 1:36 | |
between Congress and executive, | 1:41 | |
also present at the table were senators and congressmen. | 1:43 | |
Senator Proxmire was there, Congressman Patman was there, | 1:48 | |
John Rhodes, Dominick, so you see we had people | 1:54 | |
from Congress both from the liberal | 2:01 | |
and the more conservative persuasions there. | 2:05 | |
Who were the economists invited? | 2:09 | |
Well, I think they were a fairly predictable list of names | 2:11 | |
once it was decided that it was | 2:15 | |
to be a broad spectrum meeting. | 2:17 | |
For example, John Kenneth Galbraith was included, | 2:21 | |
and I take that to be a signal | 2:25 | |
that people off the mainstream | 2:28 | |
of conventional economics were to be represented there. | 2:32 | |
In addition, there was a professor | 2:39 | |
who was about to go to the Hoover library | 2:43 | |
who would be, I suppose, presumed | 2:45 | |
to represent a more conservative viewpoint. | 2:47 | |
Now, of course you can't have everybody. | 2:51 | |
Lacking, notably lacking, from the standpoint | 2:54 | |
of an inside professional was that there was no invitation | 2:57 | |
to Gardner Ackley, a former chairman | 3:01 | |
of the Council of Economic Advisors. | 3:03 | |
But perhaps it was felt that Otto Eckstein, | 3:05 | |
Arthur Okun and Walter Heller were enough | 3:08 | |
of a representation of his view. | 3:12 | |
Also not present was professor James Tobin of Yale, | 3:15 | |
who represents a view discernibly different | 3:21 | |
from that, let's say, of Walter Heller, | 3:27 | |
and perhaps of somebody like myself. | 3:30 | |
But again, it may have been felt | 3:32 | |
that you can't have everybody represented. | 3:34 | |
And Richard Cooper of Yale, formerly provost, | 3:35 | |
now returning to be a professor | 3:40 | |
of international economics at Yale was there, | 3:41 | |
and he did, as it happens, in giving his view, | 3:44 | |
also give some of the views of Professor Tobin. | 3:49 | |
Well, Professor Milton Friedman was there, | 3:54 | |
Professor Beryl Sprinkel, the monetarist, was there. | 3:56 | |
We did not have Alan Meltzer and Karl Brunner, | 4:02 | |
other monetarists, represented there. | 4:07 | |
But, by and large, there was a pretty good representation. | 4:09 | |
I should say that Herbert Stein now a professor | 4:12 | |
at the University of Virginia was, of course, | 4:15 | |
invited there, and Paul McCracken, | 4:18 | |
formerly a chairman who also seems | 4:19 | |
to have some personal relationship | 4:21 | |
with the new president was there. | 4:23 | |
There were some people from, I guess | 4:27 | |
you would have to say industry and labor, | 4:29 | |
for example there was a representative there | 4:32 | |
from the CIO AFL, AFL-CIO, and there was | 4:36 | |
a representative from the Chamber of Commerce. | 4:43 | |
It was very pleasing to see that | 4:46 | |
there were a couple of women there. | 4:48 | |
There was, and by the way, in my judgment, | 4:51 | |
they performed among the outstanding performers there. | 4:55 | |
Marina Whitman, formerly with the Nixon council | 5:01 | |
and an expert in her own right | 5:06 | |
in international economics, was there. | 5:08 | |
Norma Pace, from the Paper Institute was there. | 5:10 | |
There was an economist from IBM, | 5:15 | |
there was an economist from Armstrong Corp, | 5:17 | |
there was an economist from the Bank of America, | 5:19 | |
so I suppose you could say there were some people | 5:23 | |
who had met a payroll there and who were practical. | 5:25 | |
I must not omit to mention that George Schultz, | 5:29 | |
formerly secretary of treasury, | 5:34 | |
but now at the Bechtel Corporation on the west coast | 5:36 | |
and in a part-time relationship | 5:40 | |
to Stanford Business School was there. | 5:42 | |
The face lacking, missing, was Pierre Rinfret. | 5:47 | |
It had been announced that he had been | 5:53 | |
personally invited by the president. | 5:54 | |
I suppose this must have been announced | 5:56 | |
by Dr. Rinfret himself, but that the staff | 5:58 | |
had vetoed the president's invitation. | 6:03 | |
Well, you can't have everything. | 6:10 | |
Now, what could have been expected before the meeting, | 6:12 | |
and what happened at the meeting? | 6:17 | |
Before the meeting, I don't think you could expect too much | 6:21 | |
of any importance and after the meeting, | 6:24 | |
I think that history will record | 6:27 | |
that that expectation was correct, | 6:30 | |
because after all, the views of all the people | 6:33 | |
at that table have been made available | 6:37 | |
to the public and made available | 6:40 | |
to the government, long since. | 6:42 | |
My own fear was that the only purpose | 6:46 | |
of the summit, once the president had committed himself | 6:50 | |
to it, was going to be an anticlimactic purpose | 6:54 | |
but that the usefulness of such a summit meeting, | 6:59 | |
preliminary summit meeting but I go | 7:05 | |
for all the meetings and the final, big summit meeting | 7:07 | |
is not to discover new truths. | 7:11 | |
You can't expect new anti-Keynesian theorems | 7:13 | |
or pro-Keynesian theorems or quite | 7:18 | |
in different ballparks from Keynes theorems | 7:22 | |
to emerge from a brainstorming session | 7:25 | |
in public by a group of experts like that. | 7:29 | |
The truth is found in the solitary study, | 7:33 | |
in the seminar room, even in bathtubs, | 7:37 | |
not in public committee meetings like that. | 7:42 | |
So I said to myself, what purpose could this serve? | 7:46 | |
And I concluded that such a conference | 7:50 | |
can sometimes be successful when you have a position | 7:54 | |
to sell, a position that most men of goodwill agree with | 7:59 | |
and what you need is a blue-ribbon certification | 8:03 | |
of that, a public relations kickoff, | 8:06 | |
and this was, to me, a very foreboding | 8:09 | |
and pessimistic conclusion, because I asked myself, | 8:16 | |
what is it that anyone could imagine, | 8:19 | |
anyone in Washington, that is, | 8:23 | |
that would constitute such a program? | 8:25 | |
And the only program that I thought of | 8:28 | |
that people could agree on and which would need selling | 8:29 | |
would be a program of blood, sweat, and tears. | 8:33 | |
What you have to do is to tough out this period | 8:36 | |
of stagnation, it hurts you, but it's really good | 8:43 | |
for you and what we need to have is the American people | 8:48 | |
back up the view expressed by so many economists | 8:53 | |
of the previous administration that, | 8:55 | |
to put it bluntly, what the country cannot avoid, | 9:00 | |
what the country actually needs, | 9:04 | |
what the country will be better off for | 9:05 | |
is 6+% unemployment for a long, long time. | 9:08 | |
Indeed, the daydreams of a Washington | 9:13 | |
administration economist, if I use my ESP, | 9:19 | |
I think it's not very hard to paint | 9:23 | |
what is in those daydreams, it's the following, | 9:28 | |
that we should not have the economy so acutely down | 9:33 | |
as to constitute what the National Bureau | 9:38 | |
of Economic Research calls a recession. | 9:40 | |
But, just on the edge of that particular dividing line, | 9:44 | |
we should keep the economy pretty much flat, | 9:49 | |
definitely growing below the par needed | 9:53 | |
to keep the labor force occupied. | 9:58 | |
So we should hope to have the unemployment rate increase, | 10:01 | |
towards 6%, do something cosmetic | 10:06 | |
and substantive about relieving some | 10:09 | |
of the human suffering, the worst human suffering | 10:12 | |
connected with that, but not all of the human suffering, | 10:14 | |
or else the medicine won't provide its therapy | 10:18 | |
and hold on for about a couple of years, | 10:22 | |
in which case, inflationary expectations | 10:27 | |
will be squeezed out of the system | 10:30 | |
and then, again, I want you to know | 10:33 | |
that I'm quoting the view of one group | 10:37 | |
of economists, perhaps the minority | 10:44 | |
of all economic experts somehow defined, | 10:46 | |
then there would be no reason why | 10:51 | |
we couldn't go forward for the rest of the decade | 10:53 | |
with steady prosperity and reasonable price stability. | 10:56 | |
I'm not sure what numbers would correspond | 11:05 | |
to all that, but I think I'm not caricaturing the position | 11:08 | |
if I say that the price level, | 11:14 | |
as measured by the Consumer's Price Index | 11:20 | |
and the GNP deflater, presumably needn't grow | 11:22 | |
by more than an average of two or 3%, | 11:26 | |
the last part of the decade, after the middle | 11:29 | |
of the decade, and that the real growth | 11:32 | |
for the economy could be pretty steady, | 11:35 | |
averaging about 4% after the shakeout period. | 11:41 | |
Well, to get there from here, | 11:50 | |
what's needed, according to this view, | 11:54 | |
is a austere budget, most of the economists | 11:57 | |
who have this view think that an austere budget | 12:01 | |
is the only good budget anyway, | 12:03 | |
that there's an awful lot of waste | 12:05 | |
in the federal budget and it is always | 12:06 | |
in season to cut down on it. | 12:10 | |
So what one should have would I presume be a $5 billion cut, | 12:13 | |
at least, from the next fiscal policy budget, | 12:23 | |
hold it down to below $300 billion, as Dr. Greenspan said, | 12:27 | |
I'm sorry, Mr. Greenspan, it's not so important | 12:31 | |
that X billion dollars be cut, | 12:36 | |
as that we show a definite new pattern, | 12:41 | |
a definite repentance for the loose budgetary policies | 12:45 | |
of the past, that we'd be on our way towards progress. | 12:52 | |
Of course, what should also take place, | 12:56 | |
according to these economists, is a strengthening | 13:01 | |
of the political hand of the Federal Reserve | 13:05 | |
to keep the rate of growth of the money supply down, | 13:08 | |
to keep it down to a reasonable long-run number, | 13:12 | |
like 4% or 5%, in that particular ballpark, | 13:19 | |
and it would be nice to get 20 out of 28 experts | 13:28 | |
to sign their John Hancocks to such a program. | 13:34 | |
This would put pressure on Congress, | 13:43 | |
in fact, some of the economists | 13:45 | |
of this persuasion think the people are ahead | 13:47 | |
of Congress in this respect | 13:50 | |
and this particular prescription, | 13:53 | |
which doesn't, perhaps, to everybody's ears sound great, | 13:58 | |
is said by these economists to be the best | 14:02 | |
that is really feasible, it just is not possible | 14:04 | |
to avoid having unemployment rise. | 14:08 | |
It is just not possible to have unemployment not rise | 14:10 | |
without bringing us right back to a new twist | 14:17 | |
of the inflationary spiral. | 14:23 | |
And the low two-digits price inflation could begin | 14:25 | |
to turn into something worse, moreover, | 14:30 | |
according to these economists again, | 14:33 | |
the change from low, two-digit inflation | 14:35 | |
which is improving to two-digit inflation | 14:40 | |
which is not improving is going, inevitably, | 14:44 | |
under the American political system | 14:47 | |
to bring in controls | 14:49 | |
and infringements on personal and private liberties | 14:52 | |
so that, although there's a cost involved | 14:58 | |
in this program, anyone who is rational | 15:01 | |
and who values freedom and who carefully puts | 15:05 | |
into the balance scales, on the one side, | 15:09 | |
the cost in terms of some extra unemployment | 15:14 | |
and some sacrificed real growth in the short run, | 15:17 | |
which isn't even a cost in the long run, | 15:20 | |
according to this view, just a trade-off through time. | 15:21 | |
On the other side, if you don't do it, | 15:26 | |
and that's the alternative which we're urged, always, | 15:30 | |
to look at, you will have lost your freedoms | 15:32 | |
and no sacrifice, for a person who really values freedom, | 15:35 | |
is too great to preserve one's freedoms. | 15:38 | |
And it would help some if 20 out | 15:44 | |
of 28 economists were to support that viewpoint. | 15:47 | |
I emphasize 20 out of 28 because unanimity | 15:51 | |
among the broad spectrum group of economists | 15:55 | |
is certainly not to be expected by any reasonable man. | 15:58 | |
Usually about 20 in the crowd go one way, | 16:04 | |
the consensus way, and then you always have another eight, | 16:08 | |
another 1/3 who are distributed | 16:14 | |
on both sides of that consensus, | 16:17 | |
those who think that a more rightward, | 16:19 | |
a more conservative, in the case | 16:24 | |
of fighting inflation, a more contractionary set | 16:28 | |
of policies is indicated and then, of course, | 16:32 | |
always a group on the other side, | 16:34 | |
presumably the AFL-CIO. | 16:37 | |
One would have ordinarily, in most years, | 16:39 | |
thought John Kenneth Galbraith, etc., | 16:43 | |
would be on the other side. | 16:45 | |
Well, that isn't at all what happened. | 16:47 | |
First, it was decided that this should be on television. | 16:50 | |
Of course, this means this is on educational television, | 16:56 | |
it doesn't mean high Nielsen ratings | 16:59 | |
but it does mean any person out in the community | 17:01 | |
who is near an urban area and who wants | 17:05 | |
to follow the proceedings is able to do so. | 17:08 | |
And so you have the spectacle of economists | 17:11 | |
on the air, all day long, if they scratched an ear | 17:14 | |
and were within camera view, then | 17:19 | |
that was transmitted all across our great country. | 17:24 | |
My forebodings were not realized | 17:31 | |
and actually, at the end of the day, | 17:37 | |
when I thought back on my return to Cambridge, | 17:39 | |
on what had happened, I decided | 17:44 | |
that it had been about as good a day | 17:46 | |
as one might have hoped for because what is it | 17:48 | |
that the economists there agreed upon? | 17:53 | |
Well, they didn't agree on anything, | 17:57 | |
if 28 out of 28 is your test, but using my rough rule | 17:59 | |
of, where 2/3 to 3/4 stood, | 18:05 | |
then there was a surprising measure of agreement. | 18:09 | |
For example, at least that number, | 18:15 | |
in fact, probably all but three or four in the room | 18:19 | |
said that it was clear that the Federal Reserve | 18:24 | |
had been too tight. | 18:27 | |
I said that if 23 out of 28 economists say | 18:29 | |
the Federal Reserve has been too tight, | 18:35 | |
it means that they really have overstayed their gambit. | 18:38 | |
Unfortunately Dr. Arthur Burns, chairman | 18:48 | |
of the Federal Reserve was not in the room all day | 18:51 | |
and when this particular type | 18:54 | |
of analysis reached its crescendo, I noted | 18:57 | |
that he was not in the room but I was assured | 19:00 | |
that a little bird would tell him what went on | 19:02 | |
in the room and when the president returned, | 19:05 | |
Arthur Burns also returned. | 19:08 | |
The president got the message | 19:11 | |
and the Federal Reserve got the message. | 19:12 | |
In fact, just yesterday, the Federal Reserve, | 19:14 | |
through an official spokesman, unnamed, | 19:20 | |
said that it already had turned. | 19:25 | |
It didn't need the advice of those experts, | 19:28 | |
it had its own advice and the change | 19:31 | |
in its reserve requirements on large CDs | 19:35 | |
that are over four months duration, | 19:39 | |
that was a signal of the turn. | 19:44 | |
Moreover, the federal funds rate, | 19:46 | |
which had been above 12% and which is watched | 19:47 | |
as a bellwether, had moved down even earlier | 19:50 | |
to 11 and a half percent. | 19:53 | |
All this news was so joyous and good | 19:55 | |
that the stock market was up for a couple of days | 19:57 | |
in a row, however, lest you think the joy was overdone, | 20:01 | |
the stock market managed to take a very sharp fall, | 20:07 | |
just yesterday, as I'm speaking, | 20:13 | |
but it had another event, for those who want | 20:16 | |
to explain the stock market, | 20:21 | |
to give them a possible explanation. | 20:23 | |
Namely, just three days after this era | 20:25 | |
of good feeling in which jokes | 20:31 | |
about the little brown jug that passes | 20:34 | |
between the University of Michigan | 20:37 | |
and the University of Minnesota were being bandied about | 20:39 | |
at the president's table and the president | 20:42 | |
was being congratulated on no longer having an enemy list | 20:46 | |
and having just a list of friends | 20:49 | |
and a listing of everybody and when I spoke | 20:51 | |
of the need for middle-of-the-road policies | 20:55 | |
and emphasized my strong Midwestern credentials, | 21:00 | |
the president jumped to grab the middle-of-the-road, | 21:06 | |
said he was a middle-of-the-road person | 21:11 | |
and of course, we have no reason to doubt | 21:15 | |
that he's a Midwestern person and all was good feeling | 21:17 | |
but of course, just two days ago, | 21:22 | |
the president, after taking guidance | 21:25 | |
from non-earthly sources decided | 21:30 | |
that he would give an absolute | 21:35 | |
and unconditional pardon to the recent president | 21:37 | |
and this, in the view of short term observers, | 21:43 | |
seems to suggest that the honeymoon's over, | 21:47 | |
so that the middle-of-the-road policy | 21:50 | |
advocated last Thursday by the group | 21:56 | |
of experts will not have a chief executive | 21:59 | |
who has quite as much clout to put it through. | 22:02 | |
But let me stick to economics. | 22:05 | |
On the budget, it was pointed out | 22:07 | |
by very many of the experts there, | 22:11 | |
that the government expenditure, | 22:13 | |
in real terms, in goods and services, | 22:17 | |
or in money terms, has been going down, | 22:20 | |
relative to the GNP in this recent inflation period. | 22:25 | |
After all, there's been a substantial cut | 22:29 | |
in defense expenditures. | 22:32 | |
We've been able to give less support | 22:34 | |
to agriculture, etc., etc. | 22:36 | |
This is particularly true at the federal level. | 22:39 | |
The state and local expenditures have not | 22:42 | |
gone down in the way that the federal have, | 22:47 | |
but that's understandable because of revenue sharing | 22:50 | |
and also because of the needs for schools | 22:53 | |
and roads and other things at the local level. | 22:55 | |
If you add in the expansion of transfers, | 22:59 | |
because we are in a welfare state, | 23:02 | |
the increase of Social Security expenditures | 23:04 | |
and other transfer expenditures of the federal government, | 23:06 | |
then what you find is that the share | 23:10 | |
of GNP, it's really not an appropriate comparison, | 23:14 | |
but let's make it because it's always made, | 23:19 | |
of total government spending at all levels has been flat, | 23:21 | |
it has not been going up in this particular period. | 23:27 | |
I won't go through the numbers with you | 23:29 | |
on this occasion, but if you will look at the unified budget | 23:31 | |
and the budget on national income account | 23:35 | |
and the full employment budget, etc., etc., | 23:38 | |
you will not find that the simple-minded thesis | 23:41 | |
that deficits out of control have caused | 23:45 | |
this last inflation can be substantiated. | 23:48 | |
Quite the contrary. | 23:52 | |
Where you will find an expanding role for government, | 23:54 | |
and this is of importance, and it's something, | 23:57 | |
which by the way, Arthur Burns | 24:00 | |
and his associates should be thinking about all the time | 24:03 | |
is in the intermediate financing level | 24:06 | |
by government of outside government activities, | 24:13 | |
whenever the Federal Reserve is very tough on housing, | 24:16 | |
then Congress and executive arrange | 24:19 | |
to have the government do some floating | 24:22 | |
of bonds by Freddie Mac and Fannie Mae | 24:25 | |
and Jenny somebody-or-other and there's still | 24:31 | |
some more brainchildren to come | 24:35 | |
and if you take in all the borrowing | 24:40 | |
for purposes like this and throw that | 24:42 | |
in the budget of the governments, | 24:45 | |
at all level, then you do begin | 24:49 | |
to see an increasing percentage | 24:51 | |
of the resources of the country, | 24:53 | |
not in government, not by government, | 24:55 | |
but under government, strong government influence, | 24:58 | |
but it would be a very peculiar theory | 25:03 | |
of macroeconomics which could associate the 12% inflation | 25:06 | |
with that particular factor and none | 25:12 | |
of the experts at that table proceeded to do so. | 25:16 | |
One of the experts there, Dr. Sprinkel, | 25:23 | |
of the Harris Trust in Chicago, | 25:26 | |
did emphasize the money levels of the budget | 25:29 | |
but since the prices | 25:34 | |
which everything, the prices of everything, | 25:42 | |
which are important in deciding what this magnitude is, | 25:46 | |
if he had deflated by that, | 25:51 | |
then he would not have had his point. | 25:53 | |
Moreover, he was the one seeming optimist | 25:56 | |
about what's going to happen to the economy | 25:58 | |
in the next year and he pointed, for example, | 26:01 | |
to the fact that the leading indicators were pretty strong | 26:04 | |
and I seem to recall over the years | 26:08 | |
that Dr. Sprinkel has been one of the important experts | 26:10 | |
interpreting those leading indicators. | 26:14 | |
However, if he still follows that subject closely, | 26:16 | |
he knows very well that many people | 26:20 | |
inside the government and in particular, | 26:22 | |
the Boston Federal Reserve Bank has systemically done | 26:27 | |
what's suggested, namely, to deflate the leading indicators | 26:33 | |
because just to have signs of inflation does not mean | 26:39 | |
signs of strength in the real economy | 26:44 | |
and when you begin to deflate, | 26:46 | |
then the leading indicators are not all that strong. | 26:51 | |
Lemme illustrate for example, if there's a frost | 26:54 | |
in Minnesota and in the Dakotas and in Canada, | 26:58 | |
then grain prices go up to limit in the commodity markets. | 27:01 | |
This contributes strength to the sensitive price index. | 27:05 | |
Well, on a simple-minded basis, | 27:09 | |
the sensitive price index has been one | 27:12 | |
of the leading indicators, | 27:16 | |
but that's really an omen of disaster, | 27:17 | |
not a good omen of strength in the economy | 27:20 | |
when, in the present situation, | 27:25 | |
those prices misbehave and I could go on | 27:27 | |
and enumerate other examples of the inflation | 27:29 | |
that is in the leading indicators. | 27:33 | |
So, to come to the second point of agreement, | 27:37 | |
the majority there indicated that what was crucial | 27:40 | |
was not the cuts in the budget. | 27:46 | |
They were rather cavalier on that particular topic. | 27:52 | |
Thirdly, and this is what was being reflected there | 27:58 | |
by both of these earlier things was | 28:01 | |
there was pretty general agreement | 28:04 | |
that it was not simple demand-pull inflation | 28:06 | |
which we were suffering from. | 28:11 | |
There was a great deal | 28:13 | |
of emphasis placed upon supply factors. | 28:13 | |
Hendrick Houthakker of Harvard, for example, | 28:20 | |
had an omnibus bill with 45 different reforms in it, | 28:23 | |
each of which would hurt some private interest | 28:28 | |
but which would microeconomically improve the performance | 28:31 | |
of the American economy and probably | 28:35 | |
also improve the equity of the American economy | 28:38 | |
and, when put in the for the first time, | 28:41 | |
would make a one-time contribution | 28:45 | |
to reducing the current rate of inflation. | 28:48 | |
I thought that the emphasis upon supply was a good one, | 28:54 | |
but it ought not to have been thought, | 28:57 | |
as it seemed to be thought there, | 29:00 | |
that there was a exhaustive dichotomy | 29:02 | |
between demand factors and supply factors | 29:06 | |
because there was a third factor, | 29:09 | |
which I thought ought to be stressed | 29:11 | |
and it certainly isn't simple demand | 29:14 | |
but also can't be called simple supply. | 29:16 | |
Namely, even when the market demand is soft, | 29:19 | |
even when the supply capabilities | 29:25 | |
of a set of industries is good, | 29:28 | |
let's take the automobile industry, for example, | 29:31 | |
there can be a tendency for prices quoted | 29:33 | |
to rise and for example, Dr. Houthakker said | 29:38 | |
that it was a scandal from an anti-trust viewpoint | 29:46 | |
that General Motors and the other three big companies | 29:48 | |
were raising their prices on autos. | 29:53 | |
Now that's not a supply factor in the sense | 29:55 | |
of a harvest failure but it's an incomes policy worsening. | 29:57 | |
And so, although incomes policy is not the best word, | 30:05 | |
but because my time is short, I'll stick with that, | 30:09 | |
I think that there should have been more emphasis there | 30:11 | |
on the problem of demand, the problem of supply, | 30:15 | |
and the problem of the pricing out, | 30:19 | |
in an incomes policy sense, of each degree | 30:22 | |
of balance of supply and demand. | 30:26 | |
Well, lemme just finish since the time is running out. | 30:30 | |
There was, to me, a surprising amount | 30:35 | |
of support, except it was a minority, | 30:39 | |
definite minority but there were three or four people there | 30:42 | |
who seemed to be favorable to price/wage controls. | 30:46 | |
Professor Galbraith, there's no surprise in that | 30:55 | |
but it seemed as if Robert Nathan, | 30:57 | |
of the consulting firm that bears his name, | 31:00 | |
was in favor of that and it actually shocked | 31:04 | |
and outraged George Schultz, who had been | 31:10 | |
with the vast majority, in fact leading it, | 31:13 | |
in saying that it was time | 31:17 | |
for the Federal Reserve to ease up. | 31:18 | |
Well, all things considered, given | 31:23 | |
that you had 28 different minds there, | 31:25 | |
it seems to me that there was an impressive amount | 31:30 | |
of agreement and I think the agreement was | 31:34 | |
in the direction of compromising | 31:39 | |
with the various evils in the problem. | 31:43 | |
And I dare say that a service was done, | 31:46 | |
even to those whose major apprehension is | 31:50 | |
with respect to the rate of inflation | 31:56 | |
because what they were advocating was just, | 31:58 | |
politically, not feasible, not in the cards | 32:02 | |
and it was going to be self-defeating. | 32:05 | |
It was going to result in a reversal | 32:06 | |
in the other direction which none of us would want. | 32:09 | |
- | If you have any comments or questions | 32:15 |
for Professor Samuelson, address them | 32:17 | |
to Instructional Dynamics Incorporated, | 32:19 | |
450 East Ohio Street, Chicago, Illinois, 60611. | 32:22 |
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