How the game is played

The explanation of wage-push inflation, as I imagine it, is simple: We demand higher wages... We get higher wages, which increases costs to our employer, so he raises his prices... This increases the cost of living, so we demand wages that are even higher... We get another wage increase, and the cycle continues.

There are two teams, the employers and the employees, the Errs and the Eees, playing King of the Hill. Whoever takes the hill receives an increase, and whoever loses the hill will fight to take it back, so as to receive another increase.

It's a good story, but it's not the only story in town. I tell the story of the King of the Hill game with three teams -- the Errs, the Eees, and the Fins. The Fins are a quiet bunch. They don't even want to be king of the hill. And they will help anyone who wants to make it to the top... for a small fee.

They don't take sides either, the Fins. If you stand back and watch the game, you'll see Fins helping Errs up the hill. You'll see Fins helping Eees up the hill. And if you watch carefully, you'll see Fins making a little money no matter who gets to the top of the hill.

As the game progresses, the Errs and the Eees come to realize how good it is to have Fins helping them up the hill. So they start using teams of Fins to get them to the top of the hill. Of course, using a team of Fins costs more than using just one, but both the Errs and the Eees think the extra cost is worth it.

As time goes by, the teams get bigger and the cost of the Fins increases. Everyone has lots of Fins helping them up the hill, and everyone realizes they need the Fins. Everyone knows that if you give up your Fins, you'll never make it up the hill. The Fins have become indispensable, even though they now cost more than we like.

If you have 10 Fins to help you up the hill and your neighbor has 12, well, you'd better up your Fin-count to 14! And so it goes.

Eventually, we get to the point where our Fins cost us so much that even when we get to the top of the hill and get our raise, we fall behind because of the cost of the Fins. The funny thing is, nobody likes that extra cost, but everyone is willing to pay it because everybody knows how the game is played.


The widely accepted story of wage-push inflation, as I've seen it, is a two-team game. That story is wrong. There are three teams: two "impatient" teams, the Errs and the Eees, and one "patient" team, the Fins.

And somehow, after all those struggles to make it to the top, it turned out that the Fins got to be the Kings of the Hill.