June 04, 1999

The Feds adoption of the price rule has lowered the inflation rate. That in turn has reduced pricing uncertainty. Corporations can plan their cash flow, tax avoidance and production process much better. That leads to gains in productivity, employment and profitability. The redistributionists and static thinkers argue that higher real wages reduce the profitability of corporations. The data show that low unemployment and high corporate profits as a percent of GDP are not necessarily adversaries. Good times benefit every one. Good economics policy benefits both labor and capital. The benefits of the price rule are many. Low effective marginal tax rates, higher productivity, profitability and real wages. We should count our blessings and hope that either Greenspan gets re-appointed or the price rule gets institutionalized.

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