A. M. WOODRUFF
Price instability has plagued Europe and America ever since the process of industrialization began. Industrialization, however, is no prerequisite to price instability. Rome had a great inflation at the time of Diocletian, about 300 A.D. France had a violent inflation when paper currency was first issued under John Law early in the eighteenth century. It had another in the period of the assignats late in the same century. Holland had the "tulip bust." The United States had inflations following the Revolution and again after the Civil War. It had violent deflations in 1873 and 1933 and minor deflations in 1893, 1907, and a few other years. It has had a period of market price instability in the late 1970s and early 1980s.
The purpose of this essay is to examine the extent, if any, to which the property tax can function as an automatic stabilizer during periods of price instability, to cool the heat of inflation and dampen the effects of serious deflation, and, if the property tax is an aggravating factor, how this could be remedied. The essay also undertakes to consider some of the side effects of the property tax on the economy during periods of instability and how the adverse influences could be ameliorated.
Prices inevitably rise when, for some combination of reasons, too much money starts chasing too few commodities. In the United States, at least, the population seems to have made moderate inflation a way of life; unions demanded and got annual pay increases, and as long as the rate of price increases stayed within moderate limits, almost everybody "felt good." This feeling was often illusory; often an individual was worse off after a pay raise, which did not quite keep up with inflation, than he was before. But the average citizen has been noticeably reluctant to encourage government to take active steps to slow down or halt a period of rising prices (call it prosperity, inflation, or anything else), unless and until the rise becomes extreme, as in double-digit in