UNDERSTANDING INFLATION

Unimposing, undoctrinaire economics--as easy to grasp, moreover, as Milton Friedman (and almost as unlugubrious as John Kenneth Galbraith). Case, a former editor of Working Papers for a New Society, divides his simple treatise into three parts: why prices tend to go up, but seldom to go down; why the inflation rate has soared of late; what to do about it. Not that he is appalled: even in the past 15 years, he points out, people's purchasing power--including that of the elderly--has more than kept pace with inflation. But inflation breeds uncertainty, fosters ""me-first""-ism, feeds on itself; hence, should be controlled. An upward drift, however, is built into the present system--to the benefit of each component. Big business is virtually immune to price competition (so increased costs mean a jump in prices; lower costs, little or no reduction); not-so-big businesses have various ways of protecting themselves too (via licensing, to limit entry; via government subsidies and price props--viz, housing, health care, agriculture); labor is no longer subject to a free, take-it-or-leave-it market either--thanks to unions and the fear thereof, unemployment insurance and the minimum wage, employers' need to pay a ""fair wage"" to secure a stable, contented work force. And, since the Great Depression, the government's economic clout--as employer, as source of transfer payments (Social Security, etc.), as administrator of fiscal and monetary policy--has evened out the boom-and-bust cycles that once periodically forced down prices and wages. Not, all told, an unhappy state of affairs; conducive, until 1966 or so, to stability and growth. And Case examines ""the series of discrete circumstances"" that boosted the inflation rate thereafter--Vietnam war deficits and erratic Nixon controls, dollar devaluation, OPEC and Russian grain purchases --chiefly to establish that no one of the popular villains was solely or primarily responsible. Which brings him to the remedy that others, too, have advanced for damping inflation without destroying the system: price and wage controls. ""The main cause of inflation. . . is that a lot of different groups have the ability to make effective claims on how the economic pie gets divided up."" The solution, then, is not to abolish big corporations--or to curtail the money supply, bring on a recession, throw marginal businesses out of business and marginal workers out of work (and, perhaps, not affect inflation). If all claims are controlled, everyone will be protected and reassured. A clear-cut recap (with the requisite statistics), a cogent argument, a deft popularization.