From: "Devine, James" <[EMAIL PROTECTED]> To: "'[EMAIL PROTECTED]'" <[EMAIL PROTECTED]> Subject: [PEN-L:27641] RE: inflation Date sent: Fri, 5 Jul 2002 16:44:57 -0700 Send reply to: [EMAIL PROTECTED]
> > I wrote: > >at some point, economists decided on a conventional definition of > >inflation as referring only to increasing prices of newly-produced goods > >and services. Jim, I have always considered inflation to be a *general* rise in the price level, rather than a rise in specific prices which feed into the CPI or, as we used to call it, the COL. This came to the fore in the early 1970s when 'inflation' (sic) took off. But at least in the early years of price increase, it was not *general* but rather the rise in _real_ cost/price of food and, after 1973 and the cartelization of energy, of oil prices. After that, it became a distributional issue with the state intervening to ensure that (at least in Canada) that the increase in price of energy resulted in a shift in income from labour to capital through wage controls, etc. The monetarists picked this up and after the mid-1970s used monetary policy to do the same thing. The point I am trying to make is that the 'inflation' was not a 'general rise in prices' but a rise in specific prices that were not demand generated but supply (monopoly) generated. That is not inflation, at least not in the Keynesian sense. Surely, the increase in the cost of HMOs, drugs, education and a lot of the elements that go in to the CPI are not a measure of "inflation" but rather a measure of market power using differential price increase to redistribute income to the powerful. Does this not give a very different meaning to CPI as a measure of market power and not of 'inflation', at least as is meant from a Keynesian (or radical) perspective? Paul Phillips, Economics, University of Manitoba
