- 11 Feb 2022 16:04
#15211633
"The Inflation Story Marries Complexity With Mendacity and Self-Righteousness
by Neil H. Buchanan
The latest inflation report was released this morning, and it was basically in line with forecasts, with the top-line number showing year-over-year inflation as of the end of January at 7.5%, up from 7.0% last month. Because even the non-opinion reporting about this issue has been in hyperventilation mode for months, the press pointed out that the 7.5% estimate (and to be clear, the official reported numbers are estimates, subject to revision) was slightly above the consensus forecast of 7.2%, making the story about how "a key inflation measure [came] in higher than expected."
Having taught the mechanics and policy questions relevant to inflation in the 1980's and 1990's while I served on economics faculties, I knew that it was surprising to students to be told that most economists do not want inflation to be 0.0%, just as it was a surprise when they learned that unemployment -- even by the lights of the most aggressively pro-labor economists -- can never be anything close to 0.0%. Beyond that, however, it is very esoteric stuff, and clarity is a serious challenge.
What is inflation? It is not "high prices," even though that is what most people think of when they think of inflation. Inflation is a general, sustained increase in prices over time. In other words, just as velocity is the change in distance over time, income is the change in wealth over time, and deficits are the change in debt over time, inflation is the change in prices over time.
As a purely technical matter, then, an increase in one or more prices is not evidence of inflation. Even so, inflation must be measured by computing a weighted average of price changes in a given month or year, which means that even price changes that are not truly evidence of a general inflationary trend will show up in the monthly inflation estimates.
This morning, TLDR ran a new piece titled "Why is Everything Getting Expensive? Cost of Living Crisis Explained," which in barely more than ten minutes brilliantly lays out the elements of the issue as it pertains to the UK. I certainly recommend watching that video (and all of TLDR's work, to which I have become addicted), but here I want to make the simple point that the first part of the title of today's video gets at precisely why politicians cannot rely on pure economic definitions when dealing with inflation."
Not only is the article worth reading, there are lots of excellent articles at that website.
http://www.dorfonlaw.org/
by Neil H. Buchanan
The latest inflation report was released this morning, and it was basically in line with forecasts, with the top-line number showing year-over-year inflation as of the end of January at 7.5%, up from 7.0% last month. Because even the non-opinion reporting about this issue has been in hyperventilation mode for months, the press pointed out that the 7.5% estimate (and to be clear, the official reported numbers are estimates, subject to revision) was slightly above the consensus forecast of 7.2%, making the story about how "a key inflation measure [came] in higher than expected."
Having taught the mechanics and policy questions relevant to inflation in the 1980's and 1990's while I served on economics faculties, I knew that it was surprising to students to be told that most economists do not want inflation to be 0.0%, just as it was a surprise when they learned that unemployment -- even by the lights of the most aggressively pro-labor economists -- can never be anything close to 0.0%. Beyond that, however, it is very esoteric stuff, and clarity is a serious challenge.
What is inflation? It is not "high prices," even though that is what most people think of when they think of inflation. Inflation is a general, sustained increase in prices over time. In other words, just as velocity is the change in distance over time, income is the change in wealth over time, and deficits are the change in debt over time, inflation is the change in prices over time.
As a purely technical matter, then, an increase in one or more prices is not evidence of inflation. Even so, inflation must be measured by computing a weighted average of price changes in a given month or year, which means that even price changes that are not truly evidence of a general inflationary trend will show up in the monthly inflation estimates.
This morning, TLDR ran a new piece titled "Why is Everything Getting Expensive? Cost of Living Crisis Explained," which in barely more than ten minutes brilliantly lays out the elements of the issue as it pertains to the UK. I certainly recommend watching that video (and all of TLDR's work, to which I have become addicted), but here I want to make the simple point that the first part of the title of today's video gets at precisely why politicians cannot rely on pure economic definitions when dealing with inflation."
Not only is the article worth reading, there are lots of excellent articles at that website.
http://www.dorfonlaw.org/
Facts have a well known liberal bias
- By ingliz
- By Potemkin
- By Puffer Fish