What Price Victory?

The toughest question in political economics is how much joblessness the U.S. should tolerate as the price of victory over inflation. Few people appreciate how excruciating that choice really is. Federal Reserve Board Governor Andrew Brimmer recently steeled himself to ask a computer what would be required in order to reduce the rate of price increases to 1.5% a year by the end of 1971. The computer coolly answered that output would have to drop 14% and that the jobless rate would go well above 7%--a level of unemployment that the nation has not seen in a decade. Brimmer then asked how much joblessness would be needed to cut the inflation rate to 1%. "The computer blew up," he said, with a touch of hyperbole. "It could not calculate that."

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