Should Inflation Be Defined Only as Price Increases? \ stacker news ~econ

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Should Inflation Be Defined Only as Price Increases?mises.org/mises-wire/should-inflation-be-defined-only-price-increases

137 sats \ 9 comments \ @Undisciplined 27 Jan econ

By Frank Shostak

Mainstream economists define “inflation” as general increases in consumer and producer prices. Yet, such a definition misses why prices increase in the first place and why inflation should be described as an artificial increase in the money supply.

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101 sats \ 0 replies \ @SimpleStacker 27 Jan

I'm not a big fan of arguing over semantics. The namespace is too small for all the different possible nuances in ideas anyway. Martin Fowler is famous for saying that the hardest part of programming is naming stuff.

It's kinda crazy, but there are more possible strings of characters and numbers that can be used for names that we should never practically run out, and yet namespace collisions is one of the most common problems, both in formal programming but also in debates and ideas.

31 sats \ 2 replies \ @Rothbardian_fanatic 27 Jan

Missed a lot there!

Suppose two transactions are conducted. In the first transaction, one loaf of bread is exchanged for $2. In the second transaction, one gallon of milk is exchanged for $1. The price—or the rate of exchange—in the first transaction is $2 per one loaf of bread. The price in the second transaction is $1 per one gallon of milk. In order to calculate the average price, we must add these two ratios and divide them by two, however, it is conceptually meaningless to add $2/one loaf of bread to $1/one liter of milk. On this Rothbard wrote,

Thus, any concept of average price level involves adding or multiplying quantities of completely different units of goods, such as butter, hats, sugar, etc., and is therefore meaningless and illegitimate. Even pounds of sugar and pounds of butter cannot be added together, because they are two different goods and their valuation is completely different.

The CPI is a totally bogus measure of anything! If we were to be somewhat accurate about indexing to inflation, we would be indexing to the money supply and its rise. The way they do the CPI is just another way to rip off the people by the government. They especially like to rip of the weak, elderly and poor, the damn cowards. This is the Federal Reserve Bank at its very best. END THE FED FTS

50 sats \ 1 reply \ @Undisciplined OP 27 Jan

I'm not as hard line about things like the CPI, at least in principle.

It's very useful to have measures like that. It's just important to keep in mind it's limitations and that you have to look at other measures too. The problem is people treating CPI like it's the Gospel Truth.

39 sats \ 0 replies \ @Rothbardian_fanatic 28 Jan

Yes, if nobody says anything about it, then people will go on thinking it is the Gospel Truth. I think the best thing to do is to use Rothbard’s little description of comparing sugar to hats or butter or guns, for that matter.

33 sats \ 4 replies \ @kepford 27 Jan

Gonna read this but my pre-read take on this is if I'm communicating with someone I use either "price-inflation or "inflation of the money supply". If I just say inflation I now assume most people think I'm talking about price inflation. I do not think you can fight against the tide of the anarchy of language. At least I can't. I'm but one node in the network.

I think the broader thing to think about here is communication. Its two-way. Assuming your agree on the definition of terms is a sure fire way to talk in circles. I really try to avoid that and I see people doing it all the time. Drives me nuts. Its harder to listen than speak. Been working on my listening skills over the past few years. It can be VERY hard and frustrating but I think its worth doing.

42 sats \ 2 replies \ @Rothbardian_fanatic 27 Jan

When I say it, I usually say, “Inflation in the money supply.” Then, I leave it at that because inflation is only and always inflation in the supply of money. Rising prices in terms of dollars is just that rising prices in terms of dollars. My big complaint is that people are always looking at things through the wrong end of the binoculars. If they turned them around they would see what is happening. They do not want to admit that an orange is an orange is an orange no matter what you pay in terms of dollars for it. The orange never changes, the changes are in the supply of money.

10 sats \ 1 reply \ @Undisciplined OP 27 Jan

people are always looking at things through the wrong end of the binoculars

I agree. That's really the core issue, whatever terminology we use for printing money and price changes.

33 sats \ 0 replies \ @Rothbardian_fanatic 27 Jan

It is also the whole reason that the progressive/lefty/Marxist/socialist/communist/murderers hijack the language to bend it to their meanings. This really reminds me of what Eric Blair warned us about language manipulation. They are channeling our thoughts because the language has been altered, which in turn, alters our perceptions. Bernays also did this and his disciples are continuing at it on the internet, though pathways like Google, Facebook and etc.

75 sats \ 0 replies \ @Undisciplined OP 27 Jan

I think that's right. I generally don't just say "inflation" either, unless I know the person I'm talking to uses it the same way I do.