MYSTERY BLOCKS

The Office of Price Administration, whose big educational job should be to persuade the U.S. public that it is going to have to sacrifice for the war effort, last week released an ingenious chart to the U.S. press which seemed to prove just the opposite. Part of the chart is the block reproduced at the left of the above diagram inscribed with the mystic number: $6 billions. According to OPA this is the amount which U.S. citizens have been "saved" through the fact that prices did not rise as rapidly as they did during the last war.

This ingenious sales campaign by OPA immediately whetted many a statistically minded brain to apply OPA's reasoning to other economic data. For instance, in the boom year of 1929 the cost of living was 27% above the depression year of 1932. Multiplying the national income in 1932 (which roughly represents net production) by this percentage, one arrives at the mystic figure of $11 billions, represented by the middle block above. This is the amount of money which the American public apparently "saved" through falling prices and the worst depression in history. Conversely, between 1932 and 1942 the cost of living in the U.S. rose by 19%. Applying this to the national income in 1942, one arrives at the third block of $19 billions, which is the amount of money that the U.S. apparently "lost" by putting on one of the greatest production spurts of any nation in the world.

Thus by concentrating only on price, one can prove that depressions are good for a nation and that booms are bad. The crimp in OPA's reasoning is, of course, that arguments about price levels must always be combined with attention to whether production of goods is rising or falling, and what kind of goods are being produced. The basic reason why all U.S. citizens must sacrifice now has little to do with prices, and everything to do with the fact that, despite record production for war, the supply of consumer goods is declining.

In this situation citizens may be made to sacrifice for the war in two ways. One way is through higher prices (inflation) by which buyers are discouraged from buying. The other way (which the Government is gingerly attempting) is by holding prices down and distributing scarce goods through rationing, while at the same time trying to drain off extra purchasing power through taxes and forced savings. But by arguing that, just by holding prices down, it is "saving" the U.S. citizen anything, OPA is not only kidding itself; it is kidding the public as to what the war means in economic terms.

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