ABSTRACT
The efficient operation of the price mechanism is dependent on the full social and economic integration of the economy. This chapter presents an attempt to show that the conditions for the successful working of a market economy are not fulfilled in the economic framework of countries at the stage of development reached in Latin America. It implicit hypothesis is that most, if not all, of the distortions in the economic system, at any rate in Latin America, are the result and not the cause of inflation. In addition, given the great difference in the degree of imperfections, the monetary measures enforcing stability might, because they can only operate through the creation of increased unemployment, further undermine the validity of the assumptions on which they are based. Moreover, monetary measures ought to distort relative prices and thus factor allocation: the maintenance of the complete integration needed for the optimal functioning of the price system.
