ABSTRACT
John Kenneth Galbraith's initial draft for wartime price controls followed what he called the liberal line of thinking at the time. Experience changed Galbraith, and soon after he took office it became apparent that his initial design was "technically and administratively unworkable." The informal theory is in contrast to Galbraith's earlier, rather formal consideration of monopoly power and price rigidities. Galbraith's 1952 view of accelerating inflation and a long-run Phillips curve at less than full employment was lost not only by the profession, but also by Galbraith. Galbraith correctly suggests that excess demand during the war was the counterpart of a buffer of unemployed resources, especially unemployed workers—the buffer that is necessary for price stability in the absence of price control. The key insight into understanding a theoretical role for price controls is to understand that in an aggregate "equilibrium" unemployed resources exceed overemployed resources.
