Re: Question about inflation

Prashanth Perumal — Thu, 20 Aug 2009 09:34:08 GMT

Where did Rothbard say such a thing? Please provide the source.

Re: Question about inflation

Caley McKibbin — Thu, 20 Aug 2009 08:29:45 GMT

By the way, there's no such thing as aggregate demand.

Re: Question about inflation

Caley McKibbin — Thu, 20 Aug 2009 08:17:02 GMT

1 and 2 are functionally the same. They both change the ratio between money and everything else.

Question about inflation

inquisitiveteenager — Thu, 20 Aug 2009 06:49:04 GMT

Rothbard said only two things can cause a general price increase in the economy. They are:

1) Monetary expansion (which I full agree with)

2) a general decrease in supply in the economy (which I don't agree with)

I want to discuss the second one.

If you had a general decrease in supply wouldn't that also mean less demand? As Frank Shostak shows demand is not something in itself. Lower supply means people are producing less, if you do not produce you cannot demand.

Since 'aggregate demand' cannot exceed 'aggregate supply' why would a decrease in supply cause price inflation?

Also, if the supply of all industries fell, that means most businesses will increase their prices. But since they can't all have increased prices (the market won't clear) all that means is some prices will go up and some will go down.

Most likely luxury industries would suffer.

I think that is one of Rothbard's mistakes, a minor one though. I don't think he saw it as a real problem for he even said in our world supply tends to rise over time.

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