Abstract

The Recent Controversy on Causes in Inflation Theory

Starting out from the traditional cost-push-versus-demand-pull debate, this study attemps above all to develop a new interpretation of the most recent controversy on causes in inflation theory. The strict separation of an economic (expansion of money supply) and a political (causes of money supply expansion) causal level eliminates the antithesis between the monetaristic and the sociological theory of inflation. The four positions in the recent causation controversy - hard-line monetarism, hard-line cost-push, ideological monetarism and eclectic view - are presented on the basis of typical examples and their explanatory value is examined. A comparison of the first (hard-line monetarism) with the fourth (eclectic view) position in the recent debate on the causes of inflation reveals an increasing degree of enlightment. Theinadmissible confrontation of a sociological inflation theory with a “purely” economic theory, the incorrect presentation of the theories as alternative explanatory approaches and the lacking separation of causal levels in hard-line monetarism contrast with the exact separation of levels and the recognition of the complementariness and mutual independence of economic and political or sociological theories in the eclectic view. The standpoint represented here by Gordon appears to be a promising point of departure for the development of a political economy of inflation.