The Cause of Stagflation

The Cause of Stagflation
Fix, Blair. (2023). Economics from the Top Down. 26 January. pp. 1-15. (Article - Magazine; English).

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In my last post, I looked at the relation between economic growth and inflation. As per usual, the evidence didn’t sit well with mainstream economics.

According to standard theory, there is a trade off between low inflation and high economic growth. The idea is that you can have one or the other, but not both. So if you want to keep inflation low, you have to ‘cool off’ the economy by slowing economic growth. (Like many things in economics, this idea comes from the totem of supply and demand.)

The trouble is, the empirical evidence shows that the opposite is true. Rather than being driven by ‘excessive’ economic growth, inflation tends to come during periods of stagnation. So despite what mainstream economists proclaim, there is little evidence for a ‘growth-inflation trade off’. Instead, ‘stagflation’ seems to be the norm.

Now, the question is why?

Soon after I published ‘Is Stagflation the Norm?’ several readers pointed out that I should take a look at causation. The idea is that we want to know what drives what. Does (low) inflation drive (high) economic growth? Or does (low) economic growth drive (high) inflation?

Well, I’ve done the math, and the results may surprise you. But before we get there, let’s take a look at what the theory of capital as power has to say about the causes of inflation.



Publication Type

Article - Magazine


causality energy growth inflation stagflation


BN International & Global
BN Power
BN Production
BN Value & Price
BN Business Enterprise
BN Capital & Accumulation
BN Comparative
BN Conflict & Violence
BN Growth
BN Industrial Organization

Depositing User

Jonathan Nitzan

Date Deposited

28 Jan 2023 02:50

Last Modified

28 May 2023 01:33


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