During the war, the fashion of general advances in wages to cover increased cost of living came into vogue. The consequent reaction on prices set up the “vicious circle” known to all economists where a general advance in wages raises prices, thus forcing up the cost of living, and so creating a fresh demand for a further increase in wages. Over and over again by simple illustrations I have tried to make this “vicious circle” clear to workmen. I have always been much impeded by one circumstance. In the early days of the war, in certain districts, as soon as a general advance in wages was awarded by the wages tribunals, or conceded by Government, the various lodging-house keepers put up their rents for rooms, or their charge for board. This was stigmatized by Labour as “profiteering.” Arguing by analogy, the workpeople contended that when a general rise in prices followed a general advance in wages, it was entirely due to profiteering. It was never admitted by the workmen that any part of the rise in prices was the natural, inevitable, logical result of the general advances in wages, through the increase of purchasing power operating on the same supply of commodities. War experiences have equally confused workmen’s minds with regard to the effect of high wages on the volume of employment. Whatever glimmering suspicion the workmen had before the war that an advance in wages in many industries tended directly, through increased cost of production, to bring about unemployment, has now practically been dissipated by the war. Time after time, I have been told that none of the general advances in wages during the war has ever caused unemployment. The explanation, of course, is that during the war workmen were not to any great extent producing commodities for an ordinary commercial market, but munitions of war for the Government, and all they could turn out the Government could take, so insatiable was its demand. The Workers’ Belief in Restricted Output