BPEA | 1973 No. 1

Upward Mobility in a High-Pressure Economy

Discussants: Alan Greenspan and
Alan Greenspan President - Greenspan Associates
William Fellner
William Fellner American Enterprise Institute

1973, No. 1

THE CHOICE OF AN AGGREGATE TARGET of resource utilization remains
one of the key issues facing policy makers and macroeconomists. Obviously,
fuller utilization of labor and capital brings benefits in the form of
extra incomes, output, and jobs; at the same time, it clearly imposes costs
by increasing inflationary tendencies. Various economists see these benefits
and costs very differently. Henry Wallich once suggested that macroeconomists
could be classified into advocates of “high pressure” and “low
pressure” operation of the economy.’ At the present time, the controversial
range for the target unemployment rate extends from 4 to 5 percent. Generally,
high-pressure advocates concede that, with existing labor market
institutions, unemployment rates below 4 percent would be associated with
unacceptable inflation; while most low-pressure advocates agree that unemployment
rates above 5 percent are intolerable.