Published: June 2023 In prior articles and newsletters, I’ve explored the causes of consumer price inflation over time. In short, the rate of consumer price inflation in an economy comes from a combination of 1) money supply growth and 2) significant changes in productivity and/or resource abundance. -Periods of fast bank lending or large monetized […]
  •  agarorn   ( @agarorn@feddit.de ) English
    3•1 year ago

    -Periods of technological stagnation, societal dysfunction, the need for resiliency over efficiency, war, and scarce natural resources tend to all contribute to the experience of inflation due to their negative affects on the supply of goods and services. On the other hand, periods of technological improvements, labor specialization, the sacrifice of resiliency for efficiency, geopolitical and civic peace, and abundant natural resources tend to all contribute to the experience of disinflation due to their positive affects on the supply of goods and services

    Weird. Wasn’t the technical advancement of the 60s/70s higher than in the last 20 years (2000-2020)? Although back then inflation was much higher than now?

    •  TheWoozy   ( @Woozy@lemmy.fmhy.ml ) English
      4•1 year ago

      I’m becoming more and more convinced that we (including economists) don’t really understand inflation. It seems to be a product of the zeitgeist. If we believe there is inflation it will be their, if we don’t, it won’t. That is at least the case for the demand side of the equation. The supply side of the equation is affected by scarcity, either man made or natural. I don’t think money supply or interest rates have nearly as much effect as we’ve long believed.

      •  anji   ( @anji@lemmy.anji.nl ) 
        4•1 year ago

        Economists admit they don’t understand the causes of inflation, but they have some understanding why they can’t understand it.

        One of the main drivers of inflation is inflation expectations. If people (and investors, and companies, and countries, etc.) expect inflation and rates to go up, they will spend cash now instead of holding it. This itself of course drives inflation! And likewise if they expect inflation and rates to go down they’ll hold cash and and bonds instead of investing in securities which might devalue during an economic slowdown. This makes inflation a very fickle phenomenon which cannot easily be anticipated and planned for like other economic trends.

        •  button_masher   ( @button_masher@lemmy.ml ) 
          1•1 year ago

          Inflation… the known unknown.

          I find this (bit wordy) quote from “The Pretence of Knowledge” apt:

          In the explanation of the working of such structures we can for this reason not replace the information about the individual elements by statistical information, but require full information about each element if from our theory we are to derive specific predictions about individual events. Without such specific information about the individual elements we shall be confined to what on another occasion I have called mere pattern predictions

          Interesting read if severely bored someday… he also talks about how everyone has to claim to know something to try be useful. Think inflation falls into that category…

        •  flatbield   ( @furrowsofar@beehaw.org ) English
          1•1 year ago

          Technology. I guess it depends on how competitive the market is. Monopolies are bad for price and most tech is patent protected.

          In this last round of inflation we had high oil and other resource prices plus labor shortages and dislocations. Add on a lot of pent up demand and also not a lot of competition. None of this is very good for prices. On the other hand now inflation is under 2% in some locations though the national average is higher.