<
https://evonomics.com/the-truth-about-inflation-why-milton-friedman-was-wrong-again/>
"Milton Friedman has been dead for more than a decade, but his ghost still
haunts us. In the 1960s, Friedman declared that inflation is ‘always and
everywhere a monetary phenomenon’ — a problem of printing too much money. Since
then, whenever inflation rears its head, you can count on someone to reanimate
Friedman’s ghost and blame the government for spending too much.
If only inflation were so simple.
Like much of economic theory, Friedman’s thinking appears plausible on first
glance. Inflation is a general rise in prices. And since prices are nothing but
the exchange of money, more circulating money means prices must increase.
Hence, inflation is ‘always and everywhere a monetary phenomenon’.
Unfortunately, this thinking falls apart on further inspection. The problem is
that it treats inflation as a
uniform rise in prices. That’s theoretically
convenient, but empirically false. In the real world, inflation is wildly
divergent. At the same time that the price of apples rises by 5%, the price of
cars could grow by 50%, and the price of clothing might fall by 20%.
To understand inflation as it actually exists, we must look not to economics
textbooks, but to real-world data. That’s what political economist Jonathan
Nitzan did during his PhD research in the early 1990s. His work culminated in a
dissertation called
Inflation As Restructuring. In the real world, Nitzan
observed, price change is always ‘differential’, meaning there are winners and
losers. The consequence is that inflation is not purely a ‘monetary
phenomenon’, as Milton Friedman claimed. Inflation
restructures the social
order."
Via Kevin O'Brien.
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
