There has been some buzz in the blogosphere lately about us wacky Austrians and our idiosyncratic definition of “inflation.” Nick Rowe calls it “a bit daft” (though goodnaturedly, as I imagine Nick would banter with someone robbing him at gunpoint), and Gene Callahan finds it not as useful as the current popular definition
says it “won’t do” while Jonathan Catalan is more sympathetic.
In this post I want to make two points:
(1) Contrary to the assertion of Blackadder, the Austrians are not “redefining words” for ideological purposes. We claim that there was an ideological redefinition in the past, which we are trying to undo! Here’s Mises (quoted by Catalan) from Human Action:
The semantic revolution which is one of the characteristic features of our day has also changed the traditional connotation of the terms inflation and deflation. What many people today call inflation or deflation is no longer the great increase or decrease in the supply of money, but its inexorable consequences, the general tendency toward a rise or a fall in commodity prices and wage rates. This innovation is by no means harmless. It plays an important role in fomenting the popular tendencies toward inflationism.
(2) I agree with the standard Austrian position on this. But because I am aware of the confusion it would cause, I always take care in my own writing to say “monetary inflation” and “price inflation” (or deflation).
I could say a lot more about why I think the original definition is important to resurrect, but that would blur the focus of this post. It’s not just Blackadder; I routinely see people claiming that guys like Schiff are “moving the goalposts” etc. with this allegedly wacky definition of inflation, and I want to emphasize that in our minds, we are trying to undo a deliberate semantic revolution that has had pernicious consequences and has served to confuse the public about what’s going on.