"If unemployment could be brought down to say 2 percent at the cost of an assured steady rate of inflation of 10 percent per year, or even 20 percent, this would be a good bargain"

William Vickrey’s statement suggests a policy perspective that prioritizes minimizing unemployment, even if it results in relatively high inflation. He posits that achieving extremely low unemployment rates, such as 2 percent, is so valuable for society that enduring high annual inflation rates, 10 or even 20 percent, can be justified as an acceptable trade-off. Vickrey implies that the social costs of unemployment, such as loss of income, erosion of skills, increased poverty, and associated social problems, far outweigh the drawbacks of persistent, yet predictable, inflation.

By framing high inflation as an “assured steady rate,” Vickrey distinguishes between stable, anticipated inflation and the negative consequences of erratic or hyperinflation. He assumes that economic agents, workers, employers, savers, and investors, can adapt to a consistently high but steady rate of inflation through wage and contract adjustments. In contrast, unemployment is regarded as a direct drain on overall well-being, both in terms of material welfare and social stability. Vickrey’s stance reflects Keynesian and post-Keyesian economic thinking in which achieving full employment takes precedence, and inflation, so long as it is managed and predictable, is considered a less harmful side effect.

Implicit in his argument is a critique of the traditional view that inflation is inherently more damaging than unemployment. Many economists, especially supporters of tight monetary policy, often argue that even moderate inflation can erode savings, distort investment, and undermine long-term economic performance. Vickrey challenges this narrative, suggesting that the overwhelming priority should be to provide jobs and reduce the wasted human potential represented by unemployment.

Ultimately, Vickrey’s assertion calls for a reevaluation of the trade-offs policymakers are willing to make and questions the rationality of accepting higher unemployment to keep inflation low. He advocates for policies that tolerate higher inflation if they secure the substantial benefits of virtually full employment.