A Study in the Theory of Inflation

A Study in the Theory of Inflation

A Study in the Theory of Inflation

A Study in the Theory of Inflation

Excerpt

This book is not a treatise on war-economics, and it does not pretend to provide any general theory of inflation; it is a theoretical study inspired by some central economic problems which have appeared during and after the second World War in many countries, including the Scandinavian countries.

The inflations of the second World War were almost everywhere marked by a considerably greater use of measures of direct control than had previously been applied, and the war and post-war inflations had to develop within this frame of direct control; the inflations thus became repressed inflations, the problems of which have been subject to only sporadic investigations. Of course, a good deal has been written about repressed inflations, most of which is purely descriptive or political in character. Investigations of the social and welfare aspects of the control measures are also to be found. But the monetary or "total" economic problems connected with repressed inflation have not been the subject of any thorough theoretical analysis.

I think, therefore, that it is useful to try to develop a monetary theory for repressed inflation. This is done in Chaps. IV, V, and VI. In order to develop such a theory, Chaps. I, II, and III give a number of definitions and concepts, discuss in a more or less tautological fashion the connections between the concepts thus defined, and examine the question of whether it is reasonable to use just these definitions.

This introductory discussion is carried out in such a way that it is also relevant for open inflation. Furthermore, during the course of my work on this book it became evident to me that it may be an advantage to consider repressed inflation as a special boundary case of open inflation, that is, it is possible to consider the models used for the study of repressed inflation as a simplified version of a special type of model for open inflation, which is developed in Chap. VII. Thus, quite apart from any significance they may have in themselves, the investigations of the problems of repressed inflation serve as an introduction to the study of open inflation.

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