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Inflation is a general rise in prices, and what the paper reports is not merely that people who received money paid their employees more (yay!) but also that em

Inflation is a general rise in prices, and what the paper reports is not merely that people who received money paid their employees more (yay!) but also that employers in villages that didn't receive any money also had to pay more in wages. Literally they experienced an inflationary shock in the labor market. The research is very quiet on this part - in the control villages the little businesses suddenly had a big problem. They couldn't/didn't raise prices because their competitors in the next village over weren't doing so, but they suddenly had to pay more in labor costs. You can say this isn't a problem but the goal of aid is to try and create sustainable increases in wealth that stick around after the money flow stops. That clearly didn't happen here. As to definitions, that's exactly the problem in talking about. The academic definition of inflation is useless and misleading. They say prices didn't go up, as if labor is some magical thing that doesn't have a price. And they neglect to mention that a very important category of prices did inflate unless you read most of the paper.

notahacker 4y ago
Price inflation is a rise in product prices. Period. This definition is not contested, not even by politicians who currently have very strong incentives to pretend that the headline rate of price inflation is "useless and misleading" and we should use a novel measure which factors in relatively low wage growth instead. The paper is not at all quiet about the spillover effects on other firms. On the contrary, it is quite clear that there is no "problem" because the firms spending more money on labour make more profit from selling more goods [at approximately the same prices as before]. This is what economists call "growth". If ever there was a case to change a definition of a term academics, politicians and headline writers all agree on, I suspect it won't come from somebody whose principal objective is to argue that "everybody has more stuff" is actually an adverse side effect.
- origin_path 4y ago
  Is your argument for why it's not misleading "but journalists and politicians repeat what academics say"? If so that's not very convincing and exactly the kind of argument I'm talking about. Headline writers are not exactly highly trusted. Anyway, I disagree that's true. I don't recall ever seeing a discussion of "price inflation" on it's own, headlines are always about RPI or CPI, i.e. where adjectives are used to narrow the range of prices being discussed. Even there, the definitions are certainly controversial with many prices that affect ordinary consumers being excluded, and hedonistic adjustment frequently being a source of surprise. It's also the kind of thing that led to catastrophic economics over the past 15 years or so because central banks kept rates very low and then near zero or even negative, printing lots of money that inflated giant bubbles in housing and then the stock market. They did this because "inflation is low", due to definitionally excluding the prices that were going up. Many people have tried to sound the alarm about this and central bankers (who are usually ex academic economists) simply ignored them. But again, really, repeating my wider point, your response is exactly the problem I'm talking about. A normal person will interpret "price inflation" as almost definitionally redundant, because inflation is a general rise in prices. There's no reason to expect anyone to interpret this as excluding wages. Same as how public health researchers define "unvaccinated" as including lots of people who have taken a vaccine, or "COVID death" in such a way as to include traffic accidents. When these people blame the reader for assuming a plain English definition, it's the sort of thing that just leads people to assume nothing academic can be trusted.

notahacker 4y ago

Price inflation is a rise in product prices. Period. This definition is not contested, not even by politicians who currently have very strong incentives to pretend that the headline rate of price inflation is "useless and misleading" and we should use a novel measure which factors in relatively low wage growth instead. The paper is not at all quiet about the spillover effects on other firms. On the contrary, it is quite clear that there is no "problem" because the firms spending more money on labour make more profit from selling more goods [at approximately the same prices as before]. This is what economists call "growth". If ever there was a case to change a definition of a term academics, politicians and headline writers all agree on, I suspect it won't come from somebody whose principal objective is to argue that "everybody has more stuff" is actually an adverse side effect.

origin_path 4y ago
Is your argument for why it's not misleading "but journalists and politicians repeat what academics say"? If so that's not very convincing and exactly the kind of argument I'm talking about. Headline writers are not exactly highly trusted. Anyway, I disagree that's true. I don't recall ever seeing a discussion of "price inflation" on it's own, headlines are always about RPI or CPI, i.e. where adjectives are used to narrow the range of prices being discussed. Even there, the definitions are certainly controversial with many prices that affect ordinary consumers being excluded, and hedonistic adjustment frequently being a source of surprise. It's also the kind of thing that led to catastrophic economics over the past 15 years or so because central banks kept rates very low and then near zero or even negative, printing lots of money that inflated giant bubbles in housing and then the stock market. They did this because "inflation is low", due to definitionally excluding the prices that were going up. Many people have tried to sound the alarm about this and central bankers (who are usually ex academic economists) simply ignored them. But again, really, repeating my wider point, your response is exactly the problem I'm talking about. A normal person will interpret "price inflation" as almost definitionally redundant, because inflation is a general rise in prices. There's no reason to expect anyone to interpret this as excluding wages. Same as how public health researchers define "unvaccinated" as including lots of people who have taken a vaccine, or "COVID death" in such a way as to include traffic accidents. When these people blame the reader for assuming a plain English definition, it's the sort of thing that just leads people to assume nothing academic can be trusted.