Capitalism Macroeconomics Lecture 13

Inflation. Exposition and critique of alternative theories of rising prices, leading to the conclusion that the quantity theory of money is the only valid explanation. The meaning of inflation. Its roots in deficits, the welfare state, and the unemployment and easy money arguments. Further effects of inflation: a. growth in government, including wage and price controls; b. the redistribution of wealth and income; c. the undermining of saving and capital accumulation and the productivity of labor; d. how inflation sets the stage for depression and deflation—why it is not a cure for unemployment or a source of capital; e. why inflation tends to accelerate to the point of destroying credit and ultimately money itself. The current state of inflation. READINGS Reisman: Chapter 19 Hazlitt: pp. 164-176 (chap. XXIII) Ludwig von Mises, “Wages, Unemployment, and Inflation” and “The Gold Problem” in Supplementary Readings in Macroeconomics [Ludwig von Mises, Planning for Freedom, pp. 150–160, 185–194] Library reading: Ludwig von Mises, Human Action, pp. 466-478. Samuelson, Chapter 13