Home > Uncategorized > Class-conflict theory of inflation

Class-conflict theory of inflation

from Asad Zaman

Economists do not understand inflation. Daniel K. Tarullo. Former Governor, Federal Reserve Board should surely be in a position to know. I will list some key conclusions from his paper with the revealing title:  Monetary Policy Without a Working Theory of Inflation :

  1. We do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policy-making
  2. Many … good monetary policymakers … have an almost instinctual attachment to some of those problematic concepts and hard-to-estimate variables.
  3. (Nonetheless!) Going forward, monetary policy decisions will need to be made with as much, if not more, emphasis on the constellation of observable indicators with which the FOMC is confronted
  4. (Despite all this!) Macroeconomists (should) continue to play a decidedly leading role.

The italicized words are mine, not in Tarullo’s paper. If we pause to reflect, these are breathtaking conclusions. Tarullo says — quite clearly and explicitly — that current theories of inflation are NOT of use for real-time monetary policy. Furthermore, despite their evident failure, economists are blindly attached to these theories — they are “ unmoved by lack of correspondence between their theories and facts of observation “. But, regardless of these, for reasons that I could not fathom, Tarullo advocates going forward with using current constellation of observable indicators, and having the blind macro-economists continue to play a leading role in monetary policy decision making.

The real reason that economists do not understand inflation is because it is an outcome of the class struggle between laborers and capitalists. This topic is taboo in conventional economic theory — it has been ruled out of bounds of the subject, and to study it is to commit professional suicide.  read more

  1. December 28, 2018 at 11:14 pm

    I think in Australia it’s just called a wage-price spiral. It was a common diagnosis in the 1960s and 1970s. Because mainstream economists ignore money they overlooked the effect of the US going off the gold standard and printing money to pay for the Vietnam war.

  2. Craig
    December 29, 2018 at 5:16 am

    Garden variety inflation is seemingly under control at rates of 2-4% by the fact that competition between agents of business models keeps it there. This is not much of a victory if you’re one of the 95% whose wages have stagnated for the last 40 years or so. All of the falderall of Keynesian and other theorizing deciphers this via examination of the minutiae of a portion of the complexity within the current paradigm. There’s nothing scientifically or methodically wrong with this of course it’s simply that it’s an extremely slow and non- resolving exercise around which no one can seem to craft a policy to effectively address the “insight”.

    An example of this is Steve Keen’s re-discovery of the cost inflationary nature of the economic system because we’re stuck between the rock of ever increasing debt service costs and the hard place of recession or depression because (for some reason) we must abide by the monopolistic cost inflationary effects of finance’s paradigm of Debt/Burden/Additional Costs Only.

    If economists would attend to the signatures of imminent and accomplished historical paradigm changes things would become much more clear and enlightening and the policy solutions would present themselves.

    For instance here is a side by side reflective comparison of the signatures of imminent and historical paradigm changes and the present one in economics and how the solutions were accomplished

    The Catholic Church/Private Banking dominatedly enforces participation in and absolution via the sacraments/the paradigm of Debt/Burden/Additional Debt Cost. The laity/individuals and commercial agents object to this dominance and declare that a direct relationship between themselves and God/direct and reciprocal monetary gifting be allowed and integrated into the digital debt based money system and so replace the primacy and end the monopolistic domination by the church’s/private finance’s paradigm and structural power.

    Ptolemaic Cosmology Terra-centric viewpoint and Copernican Helio-centrism/Finance’s paradigm of Debt/Burden/Additional Cost and direct and reciprocal monetary gifting are in conceptual opposition. The invention of the telescope as a tool and the discovery of the ellipse/the inversion of abstract thinking to direct looking at the moment to moment operations of the economy leads to the re-discovery of the significance and power of the point of retail sale for monetary policy effect and enables the inversion of the positions of the earth and the sun/inverts the the systemic reality of austerity and individual monetary scarcity to abundance with the reciprocal policy of a discount/rebate policy.

  3. December 29, 2018 at 6:39 pm

    “The real reason that economists do not understand inflation is because it is an outcome of the class struggle between laborers and capitalist”
    What are your assumptions on which you base this assertion, Assad? Do you have any? For if you don’t, I’m afraid you’re just preaching to the choir; without disseminating useful information to non-members.

    Following my own assumptions: the real reason is, that economists of all persuasions lack a theory of money; which is a prerequisite to the understanding of inflation. The only coherent attribute of money is being a “no-thing” unit of account. All the others are empirical observations. They are useful to identify conventions and institutions, but can’t be used as theoretical points of departure, without running into paradoxes or contradictions. Upon money solely being a unit of account, paradoxes and contradictions have no way to make an appearance. And a comprehensive theory of inflation can be made to roll out from that deduction as a result. The only possible question remaining is whether it’s relevant to the real world.

    If you’re satisfied that Keynesian paradoxes are yet somehow enlightening, I’m sure the above is meaningless to you. But be prepared to listen to the orthodox mantra till the cows come home, that it takes a theory to beat a theory.

    • Craig
      December 29, 2018 at 8:06 pm

      Money is most basically accounting, and the most basic cause of inflation is not having a better alternative to commercial agents enforced into existing in an austere money system and economy raising their prices in an attempt to garner more revenue. Economists need to be better engineers much more than they need to be greater theorists, and better philosophers and paradigm perceivers than even engineers.

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