Social Inflation; P.L. Poirot

PAUL L. POIROT A PECULIAR tendency of thinking human beings is to behave, not necessarily in response to the facts of a given·· situation, but in re sponse to what they believe is the situation. Men who believe there are dif ferent kinds of inflation may be convinced that different cures are needed. For instance, if it is a "cost push" inflation, and high wages are believed to be the cost of production most responsible for the extra push, then the obvious cure would seem to be a rollback or other control of wage rates. Or, if high profits are believed to be responsible for pushing prices upward, then the most like ly cure would be an "excess-prof its" tax or some such limitation of profits. The latest new kind of inflation is alleged to be "social inflation" - due to the extra expense of cleaning up air and water, foster~"'A ing "consumerism,"· meeting other social goals. And when the doctors of the sick body politic get around to it, they might possibly come to believe that the cure for social in flation is to clamp a lid on Federal spending.

In view of the widespread dis agreement about the facts con cerning inflation in the United States of America in 1972, let us imagine a comparable situation at some other time and place. Let's say it's the year of the millennium in Utopia and see if we can visu alize the facts. Let's further imagine that the residents of Utopia are as bright on the whole as weare, living under what is generally described as a free mar ket economy with quite a lot of government intervention. For the sake of simplicity let's say that about a. third of the la borers in Utopia are members of a union under the leadership of Mr.