Confessions of a price controller

by C. Jackson Grayson

Book by C. Jackson Grayson, Louis Neeb

Hardcover

First published January 1, 1974

Reviews

[Frank Stein · Rating 4 out of 5]

Few today remember the "Economic Stabilization Program" Nixon inaugurated by fiat on August 15th, 1971. Some may recall that on that day Nixon "untied" the US dollar from gold, but he also froze prices across the entire economy for 90 days and imposed a 10% import surcharge on all goods entering the country. In the midst of what was then known as "Nixon Shock," Nixon called an obscure business school Dean from Southern Methodist University to administer "Phase II" of this stabilization program. He wanted C. Jackson Grayson to head the new Price Commission, which was supposed to administer and control prices in everything from automobiles to canned peas. This is Grayson's memoir of the one and a half years he spent as the nation's price "czar."

The wonderful thing is that Grayson is amazingingly frank about his ignorance and incapacity in the whole matter. He knew nothing about the program before being summoned to Washington, and said he got most of what he knew about it from Time magazine. Just hours before the commission's first press conference, the commission (who also admitted to their own ignorance in these matters) and Grayson engaged of a heated argument over whether a 2.5% price increase limit should be enforced on every firm or just across a whole economy, a question of almost providential importance (2.5% became a general guideline for the whole economy). He admits that lawyers tasked from the SEC and other agencies just xeroxed whole sections of other regulations into their new regulations to get them out in time. He admits that even later the whole commission unanimously agreed to a policy on passing through profit margins costs without understanding what that meant, and then had to argue later about what they had to agree to.

From our perspective, the whole price control enterprise seems foolish. How were Grayson and 600 staffers supposed to decide the price of every item sold to 200 million people? Grayson shows why it was so difficult though. For instance, they authorized grocery stores to provide their "customary initial percentage markup" for selling goods. If frozen peas were marked up by 20% from the purchase price, they couldn't be marked up any more than 20% under the new system. Sounds simple? Wrong. Does the regulation apply to markups averaged across the whole firm (say Krogers) or individual stores? To departments or individual items in the department (say all meats or to rib eyes, T-bones etc.)? To different brands of products? What if the "customary" practice changed recently, should firms go back to the old one? What if markups were given at the discretion of individual store owners and changed constantly? It was all fiendishly, if not impossibly, difficult, and modern price controllers in Obama's Independent Payment Advisory Board should take heed.

To today's readers though, the most surprising part of the book may be Donald Rumsfeld central part in it. In one of his less heralded roles he headed (with Dick Cheney as his deputy) the Cost of Living Council, which supervised the Price Commission and tried to organize inflation-fighting efforts across the whole government. Grayson portrays Rumsfeld as a sharp, intelligent youngster who gave no quarter yet mostly stayed out of the way of internal Price Commission decisions.

So, for a history of economic policymaking in the Nixon years, or for a great look a what an ad-hoc government agency looks like in practice, this is a good place to go.