ABSTRACT
This first session, devoted mainly to the aims and instruments of demand management, started with some clarificatory statements about the aims and conclusions of the Brookings Report. Professor Solow pointed to a possible misunderstanding about the Brookings conclusions which sprang from different uses of the word stabilization. In American usage a stabilization policy means more than just ironing out fluctuations at a particular level: instead, the policy is essentially short-run macro-economic policy aimed at such things as a high level of employment, some sort of target for the behaviour of the price level, and in an open economy some attention to the balance of payments as well. By adopting a narrow view of stabilization, Professor Matthews had skirted around what really should be at the centre of any current discussion of stabilization policy, namely, the relation between pressure of demand, the level of real output and employment on one hand, and wage and price behaviour on the other. The balance of payments certainly enters as well into this relationship, although as Worswick emphasized in his paper, it is affected also by the simple compression of incomes, quite independently of the consequent behaviour of the price level.
