The social and psychological causes of inflation

Abstract

It appears that it is no longer possible for the rate of inflation in Britain and other advanced industrial economies to be controlled by the traditional macro- economic reglators, at least within the limits imposed by other politico-economic goals (such as the maintenance of an acceptable level of unemployment). This has led many to look for explanations of inflation beyond economic analysis: in the psychology of wage and salary earners; in the changing class structure of our society; in the changing loci of power and means of exercising power; and in our systems of labour relations and pay determination. The author's organization (PEP—Political and Economic Planning) have just come to the end of a programme of research concerned with the contribution that non- economic perspectives can make to an understanding of the process of inflation. The author has been focusing upon the pressure on pay and has carried out two studies designed to explore the forces contributing to the apparent increase in the demand for pay increases and the conviction that these are legitimate among wage and salary earners. This article describes his findings.