Tyler Cowen wants to know. I think I can explain.
First, I should note that Cowen isn’t concerned with the current rate of inflation (the highest in more than 30 years). He is wondering, instead, why do economists — almost universally — have a negative view of inflation.
In other words, Cowen is asking a question about theory by way of pointing out that economists don’t have a theory to explain why inflation is undesirable. So, here is my explanation.
Inflation is a type of devaluation in which the same quantum of money trades for fewer goods. Cowen observes that generalized inflation can affect both the income and expenses of an affected population such that the only thing that changes is the price level the members are accustomed to operating with.
Suppose, for example, the objective value of a unit of bread is the amount of labor a bread-eater expends to obtain it. If all goods have a similarly defined objective value, then prices could rise across the board, including the price for labor, such that the objective values remain the same. Specifically, if the bread-eater once worked an hour to buy a loaf of bread for $1.00, he could just as easily work an hour to buy a loaf of bread for $2.00, assuming his income rose to cover the increase.
But what if, instead, there is no objective standard of value? More generally, what if there is no mechanism, no unseen hand, to cause a population’s income and expenses to remain in balance? What if income and expenses naturally vary independently from one another?
In that case, any price increase at all must be a very scary thing. When there is no certainty that higher expenses will be met with higher income, any single price rise might be the flapping of a butterfly’s wings that initiates a chain reaction that builds into catastrophic chaos.
Put another way, if income and expense levels naturally vary independently from one another, then the entire economy is necessarily fragile in this respect such that any minor disturbance could destroy it.
I imagine that economists grasp this intuitively since, like Cowen, they know economic value is purely subjective.