Some Neglected Microeconomics of Inflation Control

Abstract

We owe to Professors Lerner, Wallich, and Weintraub, and more explicitly to their proposals for microeconomic incomes policies (MAP, TIP, and so on), a revival of interest in a much broader range of intermediate microeconomic policies — which the skeptics call gimmicks — for control of inflation and mitigation of inflationary expectations. I call their proposals “intermediate” because they fall short of outright long-term wage and price controls; the administration of TIPs is therefore hoped to be less threatening to civil liberties. At the same time, TIPs are intended to be less recessionary — less stagflationary, if you please — than the conventional delayed-action medicine of monetary disinflation, that is, decelerated monetary growth.