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Press, Volume LXIX, Issue 20904, 11 July 1933, Page 11

often spoke as if it were better to attempt to stabilise wholesale prices, even if that should not be precisely the right thing to stabilise, rather than make no attempt at stabilisation at all. Recent history has shown this to be a mistake. So far as a fall of prices is due to more efficient production, which is the same thing as a reduction of costs, it is not only unfair to consumers to check the downward price movement, but such a check will produce the same disorganisation of the productive processes as we now associate with inflation, in the popular sense of that word. In other words, a stable price level at a time when productive efficiency is increasing is the same thing as inflation. Unless prices are allowed to fall in proportion to the improvements in production, profits will be unduly inflated, and a boom will lead us into inevitable reaction and depression. A stable wholesale price level under these conditions means an unstable economic organisation. Irving Fisher shows an insufficient appreciation of the significance of this point which is all the more to be regretted, because the failure of stabilisation along the lines which he suggests would, quite unwarrantably, discredit Other attempts at stabilisation, more likely to be successful because their administrators had. in the selection of the things they wished to stabilise, paid more attention to the nature of the economic structure as a whole. The point is not merely an academic one. and has a direct application for New Zealand. If real stability means not a stable wholesale priceindex, but a price-index which falls as productive efficiency rises, it is wrong to suppose that the recovery of New Zealand is dependent on the recstablishment of the same relationship between export prices and other prices as prevailed in the past. If ihe efficiency of production has increased more rapidly in the export trades than elsewhere, there is no need to complain because export prices fall relatively to other prices. The relative fall has of course been much greater than can be explained in this way alone but any attemDt to keep export prices and other prices at the same level would mean instability and disequilibrium in New Zealand. And though a mild measure of inflation would at the present time probably be n useful aid to recovery, the success of even such a limited and emergency measure would depend to a large exSnt on the wider views which those nersons who control the inflation take of the nature of the price policy which is later to be made a permanent part of our economic organisation.