Robert uses the term, tax based incomes policy,  in a way that is quite different than the way it is generally used. Since the use ties into the cost push issue, I will comment briefly on it. 
Tax based incomes policies refered to policies involving taxes on increasing wages or prices (incomes) not to supply side polices of Laffer, as Robert suggests.  

The best way to think of Tips (as they were calle3d) is as a variant of Abba Lerner's and my market based incomes policy (Our book was called MAP: That Market Anti Inflation Plan) which created property rights in value added prices, and required any agent raising his value added price (his income) to buy the right from another who lowered his by an offsetting amount. The plan forced all price changes to be relative price changes, because the unit of account is stabilized by law. We saw MAP as  a generalization of incomes policy. It was designed to be contrasted with regulatory incomes policies and to provide a theory of incomes policies, showing how they were not necessarily anti-market at all. They just involves a different specification of property rights. 

The cost push issue  enters in by considering what price the price of raising price would be, and how it would be related to the pressure in the economy. If there was no inflationary pressure the price of raising price would be zero.  If there was deflationary pressure, there would be a negative price, and if there was inflationary pressure the price would be positive. I argued that because of institutional factors affecting price dynamics, there would be a tradeoff between the price of raising price and the NAIRU, or capacity at which the economy could operate. This tradeoff corresponded to the Phillips curve, but related unemployment to the MAP credit price, not inflation.  By making this relationship the goal was to capture what an incomes policies was meant to do--to change the level of unemployment that had to be accepted to prevent accelerating inflation. It had nothing to do with statics--it had to do with dynamics, and thus all the discussion of monopoly (as opposed to monopolization) was off point. 

There's much more to be said about the plan and incomes policies.  M goal here is definitely not to get into a discussion of the theory and the  plan. Instead, I just want to relate it to the cost push issue, which both Abba and I wrote about.  The "cost push" theories of inflation can best be understood as a reaction to demand pull theories of inflation. They argued that in general equilibrium, the Walrasian ge model did not capture the dynamics of the price adjustment process, and that in a reasonable discussion of those dynamics, both supply side factors and demand side factors had to be taken into account.   The two operated as two blades of a scissors, and affected the nature of the steady state dynamic equilibrium that the economy reached.  Our argument was the dynamics affected the steady state equilibrium, but it was an argument that the profession did not want to explore. A cost push theory of inflation alone is stupid, but so too is a demand pull theory which is the primary theory that existed, and is what the early cost push theorists were reacting to.    

Dave Colander
________________________________________
From: Societies for the History of Economics <[log in to unmask]> on behalf of Robert Leeson <[log in to unmask]>
Sent: Saturday, February 27, 2016 9:33 AM
To: [log in to unmask]
Subject: Re: [SHOE] cost push

Dick writes: 'Not until the Thatcher years were income policies and belief in cost push theory finally abandoned in the UK.'

But ... in 1974, didn't "the market" (that is, four political operatives, Rumsfeld, Cheney, Laffer, and Wanniski) conjure-up a tax-based incomes policy that achieved what "the state" never could: four decades of flat real income (non) growth?


On Thu, Feb 25, 2016 at 2:27 PM, Richard Lipsey <[log in to unmask]
<mailto:[log in to unmask]> > wrote:



I do not think we need to get into a debate about the realism of the cost
push theory of inflation, especially using modern figures for labour’s share
in construction, which has been declining over the years.



What matters for historians is that the theory was widely held in the post
WWII UK, It was much debated when I was first a student (1953-55) and then
staff member at the LSE (1953-63). It was also widely held by such Cambridge
Keynesians as Joan Robinson and Richard Kahn. This observation raises a
related point that often bothers me in discussions of past theories: much of
UK economics in the  first half of the 20th century was held in the oral
tradition and not written down, which poses a real problem for historians of
the subject. Over and over in the 1950s I heard early Keynesians expressing
the worry that now that we had the tools to prevent recessions, organised
labour would not have recession worry as a restraint when pushing for higher
wages and they would do so. Of course for this push to cause continued
inflation, a necessary condition was that the money supply was endogenous,
which many Keynesian, including my good friend, Nicky Kaldor, believed. I
had a long exchange with him on this matter. Although these economists were
not anti-labour and indeed more on the left than many others, they still
believed that union power could cause an inflationary problem.



Also if you look at UK macro policy, you see a long succession attempts to
control inflation with wage and price controls, often called incomes policy.
In the 1970s major concessions were granted to unions to bring them on board
with the latest versions of incomes policies that were motivated by a belief
in the wage price spiral. Not until the Thatcher years were income policies
and belief in cost push theory finally abandoned in the UK.



There were too many intelligent people on the cost push side of the debate
to dismiss them as not being aware of such evidence as Mason refers to.



Richard Lipsey



From: Societies for the History of Economics [ <mailto:[log in to unmask]>
mailto:[log in to unmask]] On Behalf Of Mason Gaffney
Sent: February-24-16 9:44 AM
To:  <mailto:[log in to unmask]> [log in to unmask]
Subject: Re: [SHOE] Is there a history of cost-push or wage-price spiral
analysis?



Dear Leeson et al.,

                20% or less of the price of a new house is the cost of
on-site labor.

                Lumber? The price of stumpage includes accumulated rent on
the growing site plus compound interest on the stored-up rents over, say, 60
years.  Do the math.

                The building site? Not much in Verdigris, Nebraska, but
over half the total price in Manhattan, Indian Wells, Kenilworth, Rancho
Santa Fe, Pacific Palisades, Malibu, or … you get the idea.

                Copper pipes and wires?  Copper ore, basis of many great
fortunes.

                Cement?  Pretty common dirt, you may think, but I believe
in the total its ingredients are our most valuable mining product – rent for
landowners. But in processing it embodies more energy per $ of value than
almost anything, and whence comes that energy?

                Aluminum?  It’s right up there with cement in
energy-intensiveness.

                Steel? Read your economic geography.

                Financing? Again, do the math on a 30-year loan.



                So now, who dreamed up this idea of a wage-price spiral, as
though to blame labor unions for inflation?  Cui bono?



Mason Gaffney







From: Societies for the History of Economics [ <mailto:[log in to unmask]>
mailto:[log in to unmask]] On Behalf Of Robert Leeson
Sent: Wednesday, February 24, 2016 2:24 AM
To:  <mailto:[log in to unmask]> [log in to unmask]
Subject: Re: [SHOE] Is there a history of cost-push or wage-price spiral
analysis?



I have been modestly directed (off-list) to the essay that I read 25 years
ago: could the author comment on where this 1913 piece sits?


  _____


From: Societies for the History of Economics < <mailto:[log in to unmask]>
[log in to unmask]> on behalf of Robert Leeson < <mailto:[log in to unmask]>
[log in to unmask]>
Sent: Monday, February 22, 2016 1:38 AM
To:  <mailto:[log in to unmask]> [log in to unmask]
Subject: [SHOE] Is there a history of cost-push or wage-price spiral
analysis?




Is there a history of cost-push or wage-price spiral analysis? (I have a
memory of seeing one about a quarter of a century ago - in the Phillips
curve literature).



Is this one of the first (1913)? Referring to the ‘groups that initiate the
rise in prices’:

It is true that no effort by labor unions can permanently succeed in
pushing wages above their natural level. In the best of cases, all that they
can achieve is to raise wages, but they cannot prevent the necessary
adjustment of wages back to their natural level. The adjustment, however,
does not come about by nominal wages coming down again to their old level.
The money wage remains unchanged. The rise in the prices of goods has the
effect of bringing real wages back to the ‘natural’ wage that corresponds to
the given conditions of the market.













--

An optimist, often disappointed, but still hopeful.

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