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Functional​ finance — how to cope with inflation

Summary:
Functional​ finance — how to cope with inflation Less well worked out is a technique of dealing with the other responsibility of the creator of money – the responsibility for maintaining its value. The key points here are not in the direct supply of money, or even in the regulation of the level of spending. The key points are in the determination​ of wage rates​ and in​ the determination of rates of markup of selling prices over costs … Higher wages relatively to prices are necessary for long-run prosperity but​ raising wages will do no good because they​ will only lead​ to higher prices and inflation. The dilemma can be resolved only by the government going to work on both money wage determination and on markup rates. Both are problems of monopoly and

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Functional​ finance — how to cope with inflation

Less well worked out is a technique of dealing with the other responsibility of the creator of money – the responsibility for maintaining its value. The key points here are not in the direct supply of money, or even in the regulation of the level of spending. The key points are in the determination​ of wage rates​ and in​ the determination of rates of markup of selling prices over costs … Higher wages relatively to prices are necessary for long-run prosperity but​ raising wages will do no good because they​ will only lead​ to higher prices and inflation.

Functional​ finance — how to cope with inflationThe dilemma can be resolved only by the government going to work on both money wage determination and on markup rates. Both are problems of monopoly and as such are inevitably destructive of a free economy. Markup rates must be reduced​ by antimonopoly measures … The most important help to the government in this will be the policy of maintaining​ full employment which will make it profitable for business to work with smaller markups.

Abba Lerner

Lars Pålsson Syll
Professor at Malmö University. Primary research interest - the philosophy, history and methodology of economics.

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