… is from page 129 of my late, great teacher Fritz Machlup’s May 1960 Review of Economics and Statistics paper, “Another View of Cost-Push and Demand-Pull Inflation“:
It is clear that an inflation of effective demand is a necessary condition not only for a demand-pull inflation of consumer prices but also for a cost-push inflation. Without an expansion of demand the cost boost would result in less production and less employment, not in a continuing rise of the level of consumer prices.
DBx: Yes.
There are several reliable litmus tests for revealing people who, despite pronouncing on economics, do not understand the first thing about how economies actually work. One of these tests is centered on the concept of “cost-push inflation” – which is the belief that inflation can be, and sometimes is, caused by “greed” or by market power. Anyone who ‘explains’ inflation in this way is a poor economist.
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Pictured here is Fritz Machlup (1902-1983).
