A lynching party is being organized for American economic freedom and prosperity.

Query: When do erstwhile liberal Democrats propose such essentially totalitarian measures as comprehensive economic controls and gasoline rationing? Under the same conditions that otherwise capable psychiatrists order up electric shock therapy: after all conventional diagnosis fails and when familiar analytic models connecting causes and symptoms lose all explanatory power.

Such is the condition today of middling establishment Keynesians. The economic doctors who failed are now reduced to attributing the nation's mounting inflationary disorder to a case of delerium economens -- an outbreak of public irrationality, fevered psychologies and animal spirits -- that lies beyond the reach of conventional policy remedies. These fevers can be expurgated from the body economic, therefore, only by lowering the mailed fist of governmental coercion on the price of labor and goods and on the volume of petroleum consumption.

But even a brief examination of the direct targets of this maneuver exposes the sheer economic demonology on which it rests. Since September 1979, for example, our oil-imports bill has been running at 2.7 percent of gross national product. During the relative economic calm of 1977, it had stood at 2.4 percent of GNP. Can a nearly unmeasurable uptick in the burden of foreign oil payments on our national income be responsible for a tripling of the inflation rate since 1977?

Moreover, do the even more heavily "dependent" West Germans and Japanese -- whose oil-import bills amount to 4.4 percent and 4.9 percent of their national incomes, respectively -- employ supernatural measures to keep their inflation rates at a fraction of ours? The fact is, gasoline rationing bears as much relevance to our real inflation problem as did the bleeding cure to typhoid fever.

The same is true of the alleged wage-price spiral. This new form of economic cancer, as some call it, is not bred by the external economic environment nor influenced by public policy. Instead, it boot-straps itself ever upward on its own internal fuel -- the grasping, irrational, shortsighted income demands on firms and workers. In the name of the national good, then, these selfish claims must be squelched and a million wages and prices forcibly harmonized to a lower standard.

This lock-step wage-price spiral is pure fiction. Prices do respond, or course, to something called unit labor costs, or what is essentially the difference between production growth and nominal wage growth. But both variables are affected by policy, and the residual -- unit labor costs -- does not explode exponentially like a metastasizing cancer.

In 1972, for example, unit labor costs rose 2.8 percent. By 1974-75, they were soaring at a 13 percent rate, but plummeted back to below 6 percent in 1977. In recent quarters, the trend has again surged into the double-digit range. To postulate that the blind, collective greed of wage and salary earners oscillates with such patterned regularity strains credulity.

Yes, something is suppressing production of growth and fueling inflated income claims, but it is not a mysterious pandemic. Today's hyperinflation is the fruit, thank heavens, of massive public rationality -- a predictable response to identifiable and hence alterable government policies.

That these policies are destructive, however, remains incomprehensible to the Keynesians because to admit that would require renunciation of the great god of Demand Management -- a deity that has utterly failed in no small part because it was attributed powers it never possessed.

Take the matter of declining productivity and stagnating real output growth -- the crux of our present problem. In the orthodox model, investment, innovation and production are elicited by an amorphous economic blob called aggregate demand, which hangs over the marketplace like a magnetic fog. If the federal economic managers arrange sufficient demand, a corresponding supply of consumption and capital goods will automatically roll out of the nation's farms, factories, export terminals and beauty shops.

But both common sense and the classical doctrines suggest otherwise -- that the supply of output is driven by the desire of producers for income. Additional production will not come forth -- even in response to floods of demand -- if its income reward is withheld or excessively taxed away.

Average tax levels are now at the highest point since 1944. Marginal rates of taxation on many forms of labor and capital income range between 40 and 70 percent.

Thus, there is a reason why the U.S. economy is producing far below its real potential: while the policy-makers have been busy performing rituals at the altar of Demand, the tax collectors -- emboldened by inflation-fed growth in nominal incomes -- have been freely roaming the countryside looting the rewards for production, or forcing the people to waste vast resources hiding their incomes in stashes, cookie jars and shelters.

More important, if the god failed -- the priests lied when they professed powers to conjure up increased demand. Government policy managers absolutely cannot stimulate, induce or create additional aggregate demand. What they can do is inject fiat credit into the economy to finance public works, make-work CETA jobs or "stimulative" tax cuts; or, in the alternative, they can simply rearrange the right to spend society's current income stream by taxing producers or borrowing from savers to pay for demand-stimulation programs.

The latter approach hasn't been tried much because it would require a vote to raise taxes or the visible preemption of private borrowers in the credit market. Consequently, most of our demand stimulation had been financed by printing more money.

But to make Diocletian's old trick work in modern times, the Keynesian managers had to assume that the American people were gullible about clipped coins and that a depreciation-proof shield rises invisibly along our national borders. Neither assumption has held up.

The dollar is the lifeblood of $8 trillion in annual free-world economic activity and has a global constituency. Today's hyperinflation is nothing more than the revolt -- from Calcutta to Cleveland -- of that constituency.

A few years back, dollar holders fled to harder currencies. The dollar exchange rate subsequently sank to unprecedented lows, causing the dollar price of some $200 billion in annual U.S. imports to surge, and then to ratchet through our entire domestic price structure. The monthly price-index bulletins worsened.

In an understandable defensive maneuver, the strong-currency countries then began pumping up their own money supplies to soak up our unwanted dollars. Now the world is fleeing from paper currencies altogether -- seeking refuge in gold, real estate, antiques and commodities of every description.

This even more ominous second flight is being registered in the price indicators, too. The past year's 25 percent rise in commodity prices (excluding oil) is not mainly due to physical shortages occasioned by droughts, plagues, resource depletion or the ayatollah-OPEC menace. Even in the case of the oil-price explosion, the free world set an all-time production record in 1979, and actual consumption was flat. But the above-ground oil inventory mushroomed dramatically and worldwide storage tanks now bulge. This occurred partly in response to genuine fears about further production outages, but mainly because dollar holders became convinced that oil inventories -- like gold, silver, sugar and copper contracts -- were a more promising place to park their liquid assets than currency-denominated bank accounts.

What is to be done? Cut taxes -- across the board and deeply. Stop redistributing income and gold-plating the public sector in the guise of demand stimulation. Fix the dollar's value to something grounded in the planet rather than political institutions -- gold, mercury or sweet potatoes. And enroll the defrocked priests of Keynesianism in a job retraining program -- they deserve mercy, too.