An interesting-looking book has arrived – I’ve not yet had chance to read it but have paged through. It’s The [amazon_link id=”B00VA7H9LU” target=”_blank” ]Truth About Inflation[/amazon_link] by Paul Donovan. It looks like a very nice overview – historical trends, why it happens, why it matters, the issues with index numbers and when to use different price indices, inflation and debt, and inflation for different social groups. The author is an eminent City economist (UBS) and the book is aimed at investors, but would therefore work as well for students – it’s non-technical but intelligent.
[amazon_image id=”B00VA7H9LU” link=”true” target=”_blank” size=”medium” ]The Truth About Inflation[/amazon_image]
The conclusion touches on the deflation question but says: “This does not mean inflation can now be pushed to one side by an investor as some kind of quaint anachronism of times past.” For one thing, in a low inflation world, small differences in inflation rates make for big differences in outcomes and returns. For another, not all groups of people in society are experiencing any deflation – it depends on your consumption pattern.
Like me, Donovan was marked by the British high inflation experience of the 1970s. He says, “I have long wanted to write a book on inflation.” Economists are indeed strange, he adds. Maybe I’m strange too, but I’m looking forward to reading this.
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The point is of course that an education in (macro-) economics should start out with such books and should skuttle conceptual vague, undefined and unmeasured ieas like ‘social utility’. If you know about any article or book which explains how we define and measure ‘social utility’, as used in for instance DSGE models, in a direct way I’ll be happy to eat my words. At this moment, it’s just mythology. An economics should move forward and start using conceptual clear measurable variables. GDP and inflation are not the problem – ‘social utility’ is.