I know a lot of monetary theorists and more classical/Austrian economists will think of inflation as the devaluing of currency directly related to an increase in money supply. Is there a use/benefit in the way inflation is viewed today in differentiating between the value of a currency dropping vs goods just becoming more expensive due to specific market conditions? Example being if eggs and other food items got more expensive because weather/disease increasing prices or just demand putting upward pressure on prices vs actual currency losing value.
In modern mainstream economics is there any value or validity in defining inflation as anything other than prices increasing?
byu/SMK_12 inAskEconomics
Posted by SMK_12
1 Comment
There is nothing wrong with talking about the money supply as a macroeconomic quantity of importance. But if we want to talk about household welfare, what matters is the change in prices, regardless of whether that price change comes from changes in the supply of money or from the supply of goods. A household does not care if gas is more expensive due to money supply or due to war—they just care about the price of gas.
The online warrior two-step of redefining inflation is a tactic to assert that only the money supply affects price growth, which is of course not true.