Another View of Cost-Push and Demand-Pull Inflation

Abstract

Some people regard “inflation” as a cause of a general rise in prices, while others use the word as a synonym for a general rise in prices. If cost-push inflation is the correct diagnosis, trade unions are to be blamed for demanding excessive wage increases, and industry is to be blamed for granting them, big business may be blamed for raising “administered prices” of materials and other producers goods to yield ever-increasing profit rates, and government may be assigned the task of persuading or forcing labor unions and industry to abstain from attempts to raise their incomes, or at least to be more moderate. If demand-pull inflation is the correct diagnosis, the Treasury is to be blamed for spending too much and taxing too little, and the Federal Reserve Banks are to be blamed for keeping interest rates too low and for creating or tolerating too large volume of free reserves, which enable member banks to extend too much credit.

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