Further Essays in Monetary Economics (Collected Works of Harry Johnson)

Chapter 13

Inflation: A ‘Monetarist’ View*

Inflation is most conveniently (and neutrally) defined as a sustained rising trend in the general price level, or – what is virtually the same thing – a rate of expansion of money income greater than the rate of growth of real output. Other definitions abound but they typically attempt to insert into the definition of the observed phenomenon either some elements of a theory of causation (e.g. ‘inflation results from excess demand’) or an implicit policy recommendation (e.g. ‘inflation results from excess money creation’ or ‘inflation occurs when money wages rise faster than labour productivity’). Some are essentially meaningless, like the famous Economist catch-phrase of the immediate post-Second World ...