INFLATION, EMPLOYMENT AND INCOMES POLICIES

1. INTRODUCTION The recent proliferation of literature on the problems inherent in inflation, unemployment and incomes policy does not lag far behind the rate of inflation that initially prompted it. Before we get into the discussion of incomes and prices policies, it will be advisable to (a) present some evidence on the wage‐price‐unemployment behaviour in selected industrialised countries and (b) discuss theoretical and empirical results which have led to the conclusion that monetary and fiscal policies will not be adequate to meet the current inflationary problems. The first should provide substance to the claim that inflation has increased over time and has now become a more critical problem; the second should throw some light on the nature of current controversy on inflation and why mixed economies should need to supplement monetary and fiscal policies by other policies to provide themselves with a better trade‐off between inflation and unemployment. Accordingly, we will (1) describe recent wage‐price‐unemployment experience in selected industrialised countries, (2) discuss theoretical and empirical issues involved in the study of wage‐price‐unemployment behaviour, and (3) present the rationale advanced for an incomes policy, and discuss the past experiences of countries which have experimented with incomes policies and conclude with the suggestion that incomes policy and manpower policy be considered as complementary.