Hostname: page-component-586b7cd67f-t7fkt Total loading time: 0 Render date: 2024-11-28T15:48:14.878Z Has data issue: false hasContentIssue false
  • English
  • Français

Price and Wage Controls in Four Wartime Periods

Published online by Cambridge University Press:  03 March 2009

Hugh Rockoff
Hugh Rockoff
Affiliation:
Associate Professor of Economics at Rutgers College, New Brunswick, New Jersey 08903.
Get access Rights & Permissions [Opens in a new window]

Abstract

The debate over wage and price controls has taken a highly stylized form. Advocates of controls stress the direct effect on the obvious problem, inflation, whereas critics stress the side effects. This paper measures and compares the effects of controls during the four periods when controls have been used in the United States in the twentieth century. Although tentative conclusions are drawn concerning the price effects, the size of the administrative bureaucracies, and so forth, the clearest lesson, as usual, is that the issue warrants further investigation by economic historians because it is important, and because the historical record is surprisingly rich.

Type
Articles
Information
The Journal of Economic History , Volume 41 , Issue 2 , June 1981 , pp. 381 - 401
Copyright
Copyright © The Economic History Association 1981

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Butterfield, L. H., ed., Adams Family Correspondence, vol. 2 (Cambridge, MA, 1963), p. 153.Google Scholar

2 Friedman, Milton, “Prices, Income, and Monetary Changes,” p. 617.Google Scholar

3 The discussions of velocity by Friedman, and Schwartz, and in A Monetary History of the United States, 1867–1960 (Princeton, 1963), p. 218 (WW I), p. 559, (WW II), and p. 598 (Korean War).Google Scholar

4 For World War II the polls cited are from Cantril, Hadley, Public Opinion: 1935–1946 (Princeton, 1946), pp. 665, 655, 659, and 669.Google Scholar For the Korean War the polls cited are from Gallup, George H., The Gallup Poll: 1949–1958 vol. 2 (New York, 1972), pp. 974, 992.Google Scholar For the vietnamese War the polls cited are from Gallup, George H., The Gallup Poll: 1949–1958, vol. 3, p. 2328;Google ScholarGallup, , The Gallup Poll: Public Opinion 1972–1977, vol. I (Wilmington, DE, 1978), p. 6;Google Scholar and Harris, Louis and Associates, Inc., The Harris Survey Yearbook of Public Opinion, 1971 (New York, 1975), p. 190.Google Scholar

5 This model is implicit in some of the calculations made by Friedman, “Prices, Income, and Monetary Changes.”Google Scholar

6 Young, Roland, Congressional Politics in the Second World War (New York, 1956), ch. 5.Google Scholar

7 This conception of the market, and the necessity for central planners to imitate its function, was the basis for the criticism of central planning made by Hayek, Mises, and others. See von Hayek, F. A., Collectivist Economic Planning (London, 1935);Google Scholarvon Mises, Ludwig, Bureaucracy (New Haven, 1944);Google Scholar and “The Defenses of Socialist Planning,” in Lippincott, B., ed., On the Economic Theory of Socialism (Minneapolis, 1938).Google Scholar

8 Putnam, Imogene H., Volunteers in OPA, General Publication No. 14,Google ScholarHistorical Reports on War Administration: Office of Price Administration (Washington, D.C., 1947), p. 166.Google Scholar

9 Dunlop, John T., Statement Before the Subcommittee on Production and Stabilization of the Senate Banking, Housing and Urban Affairs Committee on the Economic Stabilization Act, Appendix P (Washington, D.C., 1974), p. A–109.Google Scholar

10 The discussion that follows is concerned with efficiency in the private sector. Gordon Tullock pointed out to me that controls may have led to a misallocation of resources by the military, since the relative prices faced by military decision makers were distorted. As he also pointed out, however, in the absence of controls other measures might have been adopted to isolate military strategists from concern with mere “monetary” costs.Google Scholar

11 Rockoff, Hugh, “Indirect Price Increases and Real Wage Change in World War II,” Explorations in Economic History, 15 (10 1978), 417.CrossRefGoogle Scholar

12 In 1969, Robert J. Gordon pointed out that capital created by the government in World War II and on other occasions that had been transferred to the private sector had not been properly counted in the capital stock estimates. See Gordon, , “$45 Billion of U.S. Private Investment Has Been Mislaid,” American Economic Review, 59 (06 1969), 221Google Scholar. Adjustment for this problem did lead to upward revisions of the rate of growth of this input, but this effect appears to have been offset by revisions of the output data for World War II.

13 Denison, Edward F., Accounting for Slower Economic Growth: The United States in the 1970's (Washington, D.C., 1979), Table 5–1, Cols. (2), (3), and (12), p. 65.Google Scholar

14 Kendrick, John W. and Grossman, Elliot S., Productivity in the United States: Trends and Cycles (Baltimore, 1980), pp. 83, 85, 115, and 117.Google Scholar

15 Gody, Celia Star and Searle, Allan D., “Productivity Changes Since 1939,” Monthly Labor Review, 63 (12 1946), 893–917.Google Scholar

16 Norsworthy, J. Randolph and Fulco, Lawrence J., “Productivity and Costs in Perspective,” Monthly Labor Review, 98 (11 1975), 44–52;Google ScholarKosters, Marvin H., Controls and Inflation: The Economic Stabilization Program in Retrospect (Washington, D.C., 1975), pp. 91–100 draws a similar conclusion from qualitative evidence.Google Scholar

17 See Clinard, Marshall Barron, The Black Market: A Study of White Collar Crime (New York, 1952), for a discussion of the many forms taken by evasion during World War II.Google Scholar

18 See Duhl, Ruth, “Enforcement History” (Typescript, Spring 1947), Harvard University Libraries, for a complete description of the enforcement effort during the war. Substantial enforcement efforts were made which would appear to be comparable to enforcement efforts in other areas.Google Scholar

19 Clinard, The Black Market, p. 38; Mansfield, Harvey C. and associates, A Short History of OPA, General Publication No. 15,Google ScholarHistorical Reports on War Administration: Office of Price Administration (Washington, D.C., 1947), p. 271.Google Scholar

20 The notion that the amount of excess demand played a crucial role in the functioning of the wartime system of wage and price controls was first pointed out by Galbraith, John Kenneth, A Theory of Price Control (Cambridge, MA, 1952), who dubbed the amount of excess demand consistent with successful functioning of the system the “margin of tolerance.”Google Scholar

21 Sanctions are from Mullendore, William Clinton, History of the United Stares Food Administration, 1917–1919 (Stanford, 1941), p. 334.Google Scholar The number of firms under observation is from Paul Willard Garrett assisted by Lubin, Isadore, Government Control Over Prices, Bulletin No. 3,Google ScholarHistory of Prices During the War, edited by Mitchell, Wesley C. (Washington, D.C., 1920), p. 145.Google Scholar

22 The sources are the same as for Table 5.Google Scholar

23 See Blackman, John L. JrPresidential Seizure in Labor Disputes (Cambridge, MA, 1967), Appendix A, pp. 257–311, for the list of firms seized in labor disputes arising from conflicts with the stabilization agencies.CrossRefGoogle Scholar