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There was an econ professor that gave a guest lecture early in my college years that said inflation is merely a societal disagreement about the distribution of

There was an econ professor that gave a guest lecture early in my college years that said inflation is merely a societal disagreement about the distribution of income between the wealthy and everyone else. He explained why this is the case very well at the time, but I can't remember the details now. If anyone else has been told this and can explain it here, it would be greatly appreciated.

notahacker 12y ago
He was most likely referring to the view that bargaining over the share of company revenues spent on wages is often a driver of inflation. In brief: Employees feel that their company's growth should be reflected in higher wage incomes for them (especially if they're worried about higher prices in future) and so seek to negotiate higher wages, to the extent labour market conditions permit them to. Business owners feel the benefits of the growth should instead accumulate to them and therefore seek to protect their profit margins by increasing prices (especially if they're worried their suppliers might put the prices up in future), to the extent conditions in their market permit.
- bsbechtel 12y ago
  I think this was similar to the argument he made.
Terr_ 12y ago
IANAEconomist, but I'll try to take a stab at it. Let's assume a growing civilization, and a government that has imposed a condition that a given currency must be accepted for debts. Deflation is the default, since currency-tokens don't multiply on their own. With deflation, the reward from "overall civilization growth" automatically go to the folks who have either actual tokens in a vault, or who are creditors to somebody who promised to get them an actual token later. (This is usually "wealthy" people.) Conversely, all the people in debt get a bad deal, where even a "zero-interest" loan is harder and harder to pay back as their debt of "one token" means more and more goods/labor. Conversely, inflation helps the people with debts, because (all else being equal) they become easier to repay as time goes on. Because people with net-debts are usually "the poor", it follows that "inflation is pro-poor." Arguing over who gets the "new tokens" being minted to combat deflation is actually a separate (albeit intensely related) debate, and that's where you hear people complaining about the Federal Reserve and stuff like that.

notahacker 12y ago

He was most likely referring to the view that bargaining over the share of company revenues spent on wages is often a driver of inflation. In brief: Employees feel that their company's growth should be reflected in higher wage incomes for them (especially if they're worried about higher prices in future) and so seek to negotiate higher wages, to the extent labour market conditions permit them to. Business owners feel the benefits of the growth should instead accumulate to them and therefore seek to protect their profit margins by increasing prices (especially if they're worried their suppliers might put the prices up in future), to the extent conditions in their market permit.

bsbechtel 12y ago
I think this was similar to the argument he made.

Terr_ 12y ago

IANAEconomist, but I'll try to take a stab at it. Let's assume a growing civilization, and a government that has imposed a condition that a given currency must be accepted for debts. Deflation is the default, since currency-tokens don't multiply on their own. With deflation, the reward from "overall civilization growth" automatically go to the folks who have either actual tokens in a vault, or who are creditors to somebody who promised to get them an actual token later. (This is usually "wealthy" people.) Conversely, all the people in debt get a bad deal, where even a "zero-interest" loan is harder and harder to pay back as their debt of "one token" means more and more goods/labor. Conversely, inflation helps the people with debts, because (all else being equal) they become easier to repay as time goes on. Because people with net-debts are usually "the poor", it follows that "inflation is pro-poor." Arguing over who gets the "new tokens" being minted to combat deflation is actually a separate (albeit intensely related) debate, and that's where you hear people complaining about the Federal Reserve and stuff like that.