Stop Moralizing Inflation – EconLib

Inflation has generated much commentary in the United States and elsewhere. Some, eg Senator Elizabeth Warren (D-Mass.) And Marxist economist Richard Wolff Inflation and price gouging are attributed to capitalist and corporate greed and corporate concentration. Such claims are dubious at best.

Greed, or any form of personal motivation, is a poor explanation for price increases, whether of specific products or of the general price level. If there is greed or interest, they are behavioral constants. Such accounts fail to explain why prices ever go up down. Are businesses less greedy when prices fall? If so, we never hear it and it suggests motivated reasoning.

Another reason for doubt. Although a corporation may have a great deal of market power, it cannot influence the whole Consumer Price Index. Inflation also occurs Unrelated to corporate concentration. In addition, prices reflect decisions by a multitude of sellers with competing interests. Sellers are more prone to collusion and price fixing, as transaction costs rise as the number of actors involved increases. The number of people who need to be aware of each other, meet and agree on a price is huge. more, Pricing Agreement tend to break Defectors are trying to beat the competition by lowering their prices against the majority.

More generally, prices do not result from the will of particular actors. There is a price Products derived from supply and demand. They reflect the myriad decisions of producers and consumers with different preferences and different opportunity costs. Inflation (a general increase in the price level) is obtained from an excess of available liquid currency over the amount of actual goods and services produced at a given moment. In simple terms, Inflation is a problem of “Too much money chasing too little product”.

Overall, personal motives have no effect on specific prices or the general price level. Intended as an explanation for market equilibrium is the social science that believes hurricanes occur because the gods are angry. In motive-centered accounts, greed or self-interest becomes a semi-mystical, common force to be defeated rather than a consistent (but partial) element of human nature.

Here’s an illustrative parody Economist Mark Perry applied to oil:

Insights into people and their dissatisfaction

Why is motivational interpretation intuitive to many? Is this type of error common? Paul Rubin calls “Folk Economics”, or “Intuitive Economics of the Untrained.” Put differently, what kinds of gut feelings or patterns of informal reasoning confuse us and why are they present?

Could be a reason Search for control, a passion that contributes to conspiracy theorizing (among other trends). Explaining causality from the success or failure of a select group is easier to deal with with much more inferential power. Contrast this with explanations based on multifactorial factors resulting in patterns arising from many different actors. The former provides a sense of psychological security about the world as a simpler place with problems that can be resolved through moral struggle between defined groups. The latter does not.

This argument is related to (but not identical to) FA Hayek claims That our minds are evolutionarily unsuited to the complexities of the modern world. We often argue using the logic of collective resource acquisition and distribution, with widely shared inputs and outputs among tribes, families, and other small groups. Such groups were important to our survival in prehistoric times. However, centralized acquisition and distribution do not accompany the complex division of labor functions in the contemporary economy.

Tyler Cowen makes the same argument A recent book:

One of humanity’s core problems is that humans have evolved to understand an environment in which many of the major problems were caused by individual human agency. Our greatest benefactors, and also our greatest threats, were small groups of other people who sought to help or harm us with very deliberate, conscious intent. We evolved into groups of status-conscious primates, for whom forming the right social alliances is key to reproductive success and thus to our well-being. So, for better or worse, we’re socially conditioned to consider what small groups of allies will do to us and what their intentions are toward us. We are rather less well equipped to think about abstract systems, the import of rules, and how the secondary or tertiary consequences of those rules can improve (or harm) human well-being in ambiguous ways.

A related factor may be what I’ll call a desire Karmic justice. This is the idea that social or economic outcomes and patterns should track the moral qualities of actors. However, market dynamics such as inflation and price changes affect people Regardless of their personal character. Similarly, all market rewards are relative performance in response to the choices of others and the productive application of capital. You can be a good person and do very well in the market or a bad person and do very well (although the markets do Many qualities are rewarded)

We also find it difficult to accept the idea that systems do not reflect karmic justice. The invisible hand Relying on rational self-interest incentives, not welfare, to give people their daily bread. Similarly, economic misfortunes such as inflation are caused by rational actors’ responses to price changes, which they too must accept as given, and thus are neither strictly honest nor evil.

Jacob Levy notes While ancient thinkers sought to link the character of institutions directly to the qualities of individual actors, modern social thought has since Adam Smith Recognize that the parts do not always equal the whole. It is not necessary for people to be virtuous to produce good results, as reflected in Smith’s famous discussion of the invisible hand. Further, Levy argues, such cases Distorted emergency ordersSocial injustice can occur without the intention of a person, as analyzed by Thomas Schelling White flight as a “tipping point” problem.

Perhaps popular responses to inflation tell us that despite our highly developed systems of economy and politics, we still need a lot of cognitive adaptation to our highly abstract modern world, governed by simple rules and complex system interactions. overall, they are “The result of human action, but not the implementation of any human design.”


Akiva Malamet is an MA candidate in philosophy at Queen’s University (Canada). He has appeared on Libertarianism.org, Liberal Currents, Catalyst, and other outlets.

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