Business: The Economy: Crisis of Confidence

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aim to hold price rises to an average of 3% yearly. Japan, Canada and Western Europe's major industrial nations had inflation rates of from 3.8% to 6% last year, yet still managed to do well economically. The U.S. cannot and should not reverse its commitment to prosperity and high employment.

Most of all, Washington needs to recognize that the economy is operating under new rules. The classical demand-restraint methods for curing inflation may eventually work, but social conditions no longer permit the sort of recession that might be needed to make them work as fast and as thoroughly as necessary−a point Arthur Burns well recognizes. By advocating an incomes policy, he has demonstrated a willingness to recognize changed conditions and use whatever policy tools seem appropriate. The Administration will need that flexibility in helping to shape tomorrow's economic policy.

* Burns' and Friedman's careers have been curiously intertwined. Burns was born in Eastern Galicia, then a portion of the Austro-Hungarian Empire, now part of the U.S.S.R.; Friedman, whose parents emigrated from that general area, studied under Burns at Rutgers, and they now own neighboring country homes in Ely, Vt.