Rising prices. Usually measured by the percentage increase in an index number of prices. Medical inflation is rising prices of medical goods and services. For medical inflation in the US see Cutler et al. ( 1996 ).
Anthony J. Culyer
Edited by Peter E. Earl and Simon Kemp
Inflation Rook, D.W. and Hoch, S.J. (1985) ‘Consuming Impulses’, in Hirschman, E.C. and Holbrook, M.B. (eds) Advances in Consumer Research, Provo, UT: Association for Consumer Research, 12: 23-7. Stern, H. (1962) ‘The Significance of Impulse Buying Today’, Journal o Marketing, 26: f 59-62. Inflation The inflation experienced in Western economies in the 1970s and 1980s evoked considerable concern in the general public and gave rise to governmental efforts to reduce it. Naturally enough, another product of the concern was heightened research interest in the
58 Inflation Steven Horwitz The Austrian analysis of inflation uses a number of the school’s most fundamental theoretical insights, including its capital theory, its monetary theory and its explanation of the relationship between prices and knowledge. In examining this analysis, we can distinguish four issues: definitions, causes, effects and policy responses. There is not one sole Austrian definition of inflation. Austrians offer two similar, though potentially contradictory, definitions. On one side is the notion of inflation as any increase in the money
The Post Keynesian theory of inflation is eclectic in a way that the neo-classical or orthodox theory is not. It allows for multiple causes of, and explanations for, inflationary phenomena, as opposed to the virtually mono-causal nature of orthodox theory. The main reason for this is a more realistic view of the credit creation process, namely the theory of endogenous money (Wray 2001 ; Smithin 2012 ). This implies that any factor that tends to raise money costs has the potential to cause an increase in the general level of prices, as entrepreneurs incurring
Edited by Thomas Cate
Inflation is a process of continuing increases in the overall or general price level. What causes inflation is the subject of a debate that can be divided between two main rival explanations involving demand-pull and cost-push theories. According to demand-pull theory, inflation is caused by an excess demand for goods and services when the economy is at, or above, its full employment or natural level of output. In contrast, cost-push theory suggests that inflation is caused by cost increases even though there are no shortages of goods and
186 Inﬂation References Goodwin, R.M. (1967), ‘A growth cycle’, in C.H. Feinstein (ed.), Socialism, Capitalism, and Economic Growth, Cambridge: Cambridge University Press, pp. 54–8. Kaldor, N. (1956), ‘Alternative theories of distribution’, Review of Economic Studies, 23 (2), 83–100. Kalecki, M. (1942), ‘A theory of proﬁts’, Economic Journal, 52 (206–7), 258–67. Palley, T.I. (1996a), ‘Out of the closet: the political economy of neo-classical distribution theory’, Review of Radical Political Economics, 28 (3), 57–67. Palley, T.I. (1996b), ‘Inside debt, aggregate
Alan A. Rabin
Rabin 02 chap05 2/15/04 3:46 PM Page 217 8. Inflation THE COSTS OF INFLATION Chapter 2 emphasizes how the use of money helps make production efficient and responsive to people’s wants. If we take these services seriously, we should recognize how erosion and instability of money’s purchasing power impair them. Most obviously, unanticipated price inflation redistributes income and wealth between debtors and creditors, payers and receivers of fixed incomes, and buyers and sellers of goods and services under long-term contracts. Even if inflation is anticipated
Edited by Louis-Philippe Rochon and Sergio Rossi
Inflation is currently defined either as a persistent rise in the general price level or as a decrease in the value of money; that is to say, a decrease in its purchasing power. If one assumes that the purchasing power of money is inversely proportional to the price level, one could easily infer that, ceteris paribus , a continuous rise in prices is but a decrease in the value of money. But is this assumption correct? Is it right to claim that a general rise in price levels affects, always and necessarily, the purchasing power of money? Inflation can be
Anthony J. Culyer
See Inflation .
The term inﬂation tax describes the fall in the value of government debt, including money, caused by inﬂation. In this way wealth is transferred from the holders of that debt to the government. Another way of illustrating the point is that the government can buy resources by printing more money (known as seigniorage ) but, as this may result in inﬂation, it may be at the expense of those who already hold money. Further reading