An incomes policy is a government policy aimed at controlling inflation and maintaining full employment by holding down increases in wages and prices by statutory or other means. In the 1960s and 1970s, when Keynesianism, demand- pull, and cost-push theories of inflation were popular, incomes policies were widely pursued in the developed world. This reflected the strong belief that inflation and unemployment were closely connected, although incomes policies were unpopular with workers, whose wages were held down, often to an extent that caused a fall in the purchasing power of their incomes, as a result of inflation. However, the emergence of stagflation cast doubts on the benefits of these policies; with the rise of monetarism and the increasing popularity of laissez-faire government in the 1980s, incomes policies became much less attractive. Research Incomes Policy
Keynesianism is an approach to macroeconomics based on the work of John Keynes. Failures of co-ordination between markets, even if these are internally efficient, may generate recession and mass unemployment. For example, unemployed workers may be unable to find jobs because there is no demand for the goods they produce although these same workers would demand the goods if they were employed and earned wages. In this view, governments have a role to play by putting money into workers' pockets through public works, i.e. creating the demand and raising the level of production through the multiplier process. This view of the economy was widely accepted between the late 1940s and the 1960s, when it came under attack first by the monetarists and more recently by the new classical macroeconomists. Research Keynesianism
Monetarism is a school of thought in economics that places money at the centre of macroeconomic policy. Based on the quantity theory of money, and first expressed by the Scottish philosopher David Hume, it relates the price level to the quantity of money in the economy. Latterly, monetarism has been the main opponent to Keynesianism, claiming that monetary factors are a major influence on the economy and that, in particular, government expansion of the money supply will tend to generate inflation rather than employment. Pure monetarism has, however, become confused with more general criticisms of Keynesianism by economic theorists and the crude distinction between monetarism and Keynesianism is misleading. Research Monetarism
The Probert Encyclopaedia was designed, edited and programed by
Matt and Leela Probert
Abbreviations
Research Incomes Policy
