(2 of 2)
Built-in Protectors. From the public's standpoint this is not necessarily bad. It quite often leads to a windfall for the consumer. In recent Senate hearings on administered prices, Chrysler President Lester Lum ("Tex") Colbert recalled that in 1946-49 the prices of most new automobiles were substantially below what the market would bear. Apart from such temporary side effects of price stability, many leading economists contend that having administered prices in a large part of the economy is a real advantage. According to Professor Alvin H. Hansen of Harvard, if businessmen cut prices at every breath of recession—and also wages—not only would national income and purchasing power shrivel but the uncertainty would discourage buying. The result, says he, could well be no increase in sales, and needless hardship.
The real issue in administered prices is whether they are administered in an interplay by management and labor that takes account of the public good. Although there is always a minority that wants Government to administer prices and wages, there is also a substantial and so far dominant opinion that the economy is so constructed that over-reaching price administration is automatically punished. Not only is the seller who gouges the public inviting another company to invade his industry but industries compete with each other for the disposable sales dollars. Over and above this, countries compete; e.g., when U.S. auto prices get too high, foreign cars come in. Citing the hard fight the aluminum industry has waged to expand markets by cutting prices, Irving Lipkowitz, Reynolds Metals Co. economist, says that the U.S. economy now has its own "built-in safeguards for consuming industries and the public."