Inflation: A Guide for Users and Losers

“Inflation has multiple causes and just as many manifestations,” according to this measured study. Blyth (coauthor of Angrynomics) and Fraccaroli (coauthor of Austerity vs. Stimulus)—economists at Brown University and the World Bank, respectively—explain that while moderate inflation is “generally a sign of a growing economy,” “bad inflation” occurs when supply shocks compel corporations to raise prices in anticipation of further shocks, leading workers to demand higher wages that companies pay for by further boosting prices. Evaluating shortcomings of the most common explanations for inflation (corporate greed, government spending, supply shocks, and tight labor markets), the authors point out, for instance, that attempts to pin recent inflation on government stimulus during Covid are difficult to square with data showing that the amount of stimulus a given country spent bears little correlation with how much inflation it experienced. Rather, the causes of and proper remedies for inflation vary over time and place, the authors argue, noting that differences in wealth and reliance on Russian oil played decisive roles in why price controls successfully tamed inflation in Spain but not Hungary in the 2020s. Blyth and Fraccaroli excel at breaking down the complicated economics into accessible language, providing as lucid a dissection of inflation as readers are likely to find. This should be essential reading for anyone looking to understand current debates around rising prices. (May)