1. We should not be using the phrase "fight inflation". It's a neolib framing, and invites backwards NAIRU thinking (brainworms). Government is the source of the price level, one way or another (failure to regulate the price-setting monopolist). So it is government fighting government. If we have no power over government policy, we simply have no ammo in this "fight" except perhaps education of the masses in order to later find some such power.
2. Deflation is disastrous for the poor. Inflation is a good thing if the source is wise government policy: e.g., boost lowest wage, and inflation erodes the purchasing power of hoarded wealth, and reduces the burden of past debt. (But, why do we tolerate households in debt in the first place, if for no fault of their own except wanting to eat?)
2. Many (well-meaning) lefties get confused with monopolists marking-up their price. This is not inflation. But a bad government policy response can result in inflation, e.g, raising the interest rate floor, cutting gov spending, &c. The one-time upwards adjustment in wages required is not inflation, does not require any interest rate policy adjustment (just keep ZIRP), and technically (hence truthfully) it is just a re-gauge of the currency. If we understand this policy option then the real wage never need decline, provided base level real output per capital has not fundamentally been eroded. Failure of governments to understand is the source if the crippling austerity, not the monopoly firm fixing prices. It is government failing to regulate. I will recognise those same monopolists & oligarchs are running the government, effectively, so that is the real predicament. Our governments are illegitimate. (Nevertheless, many good decent people still get elected to office, and hired in the civil service, so we are not entirely screwed. Just mostly screwed, especially if those people are too cowardly to risk getting fired for speaking the truth.)
3. So what we need to fight, if anything, is Deflation tendencies.
4. I did a quick scan before reading (which is one way to offer a blind critique without reading the whole thing! 🤣) No occurrence of "nominal inflation" nor "real inflation". But these need to be mentioned up-front. Inflation is not a monolithic concept of "continual increase in the price level" — that is an ACADEMIC definition, but not the one most people have in their minds, right? People see one price or two go up and scream "hyperinflation!" and "end of the dollar!" — not just "people" but 90% of fintec youtube as well, even marxist youtube (Wolff, Haiphong, etc.). They are all ⓜ𝘰𝓇𝗼ⓝ𝒔 ... in that domain (maybe not in other domains).
5. The Trump/DOGE crew tried mightily to send the USD to zero and replace it with crypto, but they did not succeed. Give them 10 years and yeah, maybe they will succeed (🤫 ssshhh, don't tell them, but all they need to do is shut down the IRS and government billing operations), but only if ordinary American people have become actual zombies. That should tell you something about all the fintec pond scum and (fake)marxist bros.
So if we want to engage in actual realpolitik I think we need to be clear about this. If what people think is erosion of the real wage, or decline in the wage share, then I think this can be considered non-academic-inflation, i.e., what really concerns most ordinary people. Not the price of a bottle of Thatcher's grocery store milk, but a decline in the number of milk cartoons your whole wage cheque (or welfare hand-out) can get you. That's REAL inflation, not nominal inflation, and that is what we need to "fight." Real and Nominal can move in opposite directions. Which direction would you want? There is only one pair that directly reduces gross inequality: (–,+).
6. I honestly (perhaps naïvely?) think the best tactic in this fight is to quit your job if you can find a worker coop. Fair wage share of profits from sales. Even if your salary goes down, I think it is what I'd do in a heart-beat if I could. Worker Coops in NZ are hard to find. There are probably more per capita in the USA (just a scaling Power Law numbers thing? I'm not sure).
I discuss "nominal inflation" I just don't use the jargon. Avoiding jargon is part of my approach. "Inflation and the cost of living Inflation does not necessarily mean that the ‘cost of living’ goes up as prices go up. That depends on whether wages and/or interest earned on savings are also going up - or not. If income goes up slower - clearly, each pound spent buys less and less over time. On the other hand if wages are rising faster than inflation citizens are becoming better off – despite the inflation."
Re: definition of inflation
This is an introduction to the topic of inflation: the definition of inflation is that - it is a continual rise in prices - not a one-off rise in a price or prices. That is how it is defined - and it's an important idea to understand. Readers need definitions to be able to argue with politicians and economists.
I primary aim is always educational. In that context that definition is appropraite.
Your comments can provide the wider political context - which is what you are doing. :-)
Whether you agree with me or not - I always welcome your comments.
I agree that's it not how it's commonly understood - that's why I feel the need to define it. It's important to understand it in that way: to understand why one policy is a good idea and another might not be. Important so that 'you' don't let a politician pull the wool over 'your' eyes. Important because it allows 'you' to understand what economists mean when they are using the word in their articles or books. I don't mean someone like yourself who's deep into economics - I'm talking about readers who want to start to understand this stuff from scratch.
Interesting article, although I wonder if it’s helpful to brand this as the MMT approach to fighting inflation. I suspect that many post-Keynesian or generally more progressive economists would agree with a lot of the policy laid out here - independently of their position on MMT per se.
Certainly there is a lot here where I talk about the mainstream approach - so you are right there. Many post-Keynsians regard MMT as just post-Keyneianism under a different brand name. Or certanly the see it as having ideas that overlap.
Couple of notes:
1. We should not be using the phrase "fight inflation". It's a neolib framing, and invites backwards NAIRU thinking (brainworms). Government is the source of the price level, one way or another (failure to regulate the price-setting monopolist). So it is government fighting government. If we have no power over government policy, we simply have no ammo in this "fight" except perhaps education of the masses in order to later find some such power.
2. Deflation is disastrous for the poor. Inflation is a good thing if the source is wise government policy: e.g., boost lowest wage, and inflation erodes the purchasing power of hoarded wealth, and reduces the burden of past debt. (But, why do we tolerate households in debt in the first place, if for no fault of their own except wanting to eat?)
2. Many (well-meaning) lefties get confused with monopolists marking-up their price. This is not inflation. But a bad government policy response can result in inflation, e.g, raising the interest rate floor, cutting gov spending, &c. The one-time upwards adjustment in wages required is not inflation, does not require any interest rate policy adjustment (just keep ZIRP), and technically (hence truthfully) it is just a re-gauge of the currency. If we understand this policy option then the real wage never need decline, provided base level real output per capital has not fundamentally been eroded. Failure of governments to understand is the source if the crippling austerity, not the monopoly firm fixing prices. It is government failing to regulate. I will recognise those same monopolists & oligarchs are running the government, effectively, so that is the real predicament. Our governments are illegitimate. (Nevertheless, many good decent people still get elected to office, and hired in the civil service, so we are not entirely screwed. Just mostly screwed, especially if those people are too cowardly to risk getting fired for speaking the truth.)
3. So what we need to fight, if anything, is Deflation tendencies.
4. I did a quick scan before reading (which is one way to offer a blind critique without reading the whole thing! 🤣) No occurrence of "nominal inflation" nor "real inflation". But these need to be mentioned up-front. Inflation is not a monolithic concept of "continual increase in the price level" — that is an ACADEMIC definition, but not the one most people have in their minds, right? People see one price or two go up and scream "hyperinflation!" and "end of the dollar!" — not just "people" but 90% of fintec youtube as well, even marxist youtube (Wolff, Haiphong, etc.). They are all ⓜ𝘰𝓇𝗼ⓝ𝒔 ... in that domain (maybe not in other domains).
5. The Trump/DOGE crew tried mightily to send the USD to zero and replace it with crypto, but they did not succeed. Give them 10 years and yeah, maybe they will succeed (🤫 ssshhh, don't tell them, but all they need to do is shut down the IRS and government billing operations), but only if ordinary American people have become actual zombies. That should tell you something about all the fintec pond scum and (fake)marxist bros.
So if we want to engage in actual realpolitik I think we need to be clear about this. If what people think is erosion of the real wage, or decline in the wage share, then I think this can be considered non-academic-inflation, i.e., what really concerns most ordinary people. Not the price of a bottle of Thatcher's grocery store milk, but a decline in the number of milk cartoons your whole wage cheque (or welfare hand-out) can get you. That's REAL inflation, not nominal inflation, and that is what we need to "fight." Real and Nominal can move in opposite directions. Which direction would you want? There is only one pair that directly reduces gross inequality: (–,+).
6. I honestly (perhaps naïvely?) think the best tactic in this fight is to quit your job if you can find a worker coop. Fair wage share of profits from sales. Even if your salary goes down, I think it is what I'd do in a heart-beat if I could. Worker Coops in NZ are hard to find. There are probably more per capita in the USA (just a scaling Power Law numbers thing? I'm not sure).
Thanks for you comments Bijou - they are welcome.
I discuss "nominal inflation" I just don't use the jargon. Avoiding jargon is part of my approach. "Inflation and the cost of living Inflation does not necessarily mean that the ‘cost of living’ goes up as prices go up. That depends on whether wages and/or interest earned on savings are also going up - or not. If income goes up slower - clearly, each pound spent buys less and less over time. On the other hand if wages are rising faster than inflation citizens are becoming better off – despite the inflation."
Re: definition of inflation
This is an introduction to the topic of inflation: the definition of inflation is that - it is a continual rise in prices - not a one-off rise in a price or prices. That is how it is defined - and it's an important idea to understand. Readers need definitions to be able to argue with politicians and economists.
I primary aim is always educational. In that context that definition is appropraite.
Your comments can provide the wider political context - which is what you are doing. :-)
Whether you agree with me or not - I always welcome your comments.
I agreed with your article. :)
I'd just never say "fighting inflation".
Yes to: "That is how it is defined" but I would say "That is how it is ACADEMICALLY defined". Not how it is commonly understood.
I agree that's it not how it's commonly understood - that's why I feel the need to define it. It's important to understand it in that way: to understand why one policy is a good idea and another might not be. Important so that 'you' don't let a politician pull the wool over 'your' eyes. Important because it allows 'you' to understand what economists mean when they are using the word in their articles or books. I don't mean someone like yourself who's deep into economics - I'm talking about readers who want to start to understand this stuff from scratch.
Keep me right when you disagree. I'm up for it.
How about I "keep you left"? :)
LOL.
“Inflation does not necessarily mean that the ‘cost of living’ goes down as prices go up.” Typo? Didn’t you mean “‘cost of living’ goes up as”?
Thanks Katharine,
Well spotted. Ooops!
I've update it.
Jim
Interesting article, although I wonder if it’s helpful to brand this as the MMT approach to fighting inflation. I suspect that many post-Keynesian or generally more progressive economists would agree with a lot of the policy laid out here - independently of their position on MMT per se.
Certainly there is a lot here where I talk about the mainstream approach - so you are right there. Many post-Keynsians regard MMT as just post-Keyneianism under a different brand name. Or certanly the see it as having ideas that overlap.