Some controversies in the causes of the post-pandemic inflation

This blog post by Marc Lavoie examines what he perceives as the two main interpretations of the current inflationary tendencies (the 'excessive demand inflation' story and the 'profit inflation' story) and contrasts them with a third interpretation. This interpretation acknowledges rising profits but argues in favor of a different mechanism that centers on changes in the relative composition of costs. As is summarized by the author: "The claim being made here is that the profit share in value-added will become higher if unit material costs (UMC) grow faster than unit labour costs (ULC), despite a given level of output and a constant markup rate."

Comment from our editors:

This blog post provides an interesting contribution to the ongoing debates about the causes of inflation following the Covid-19 pandemic and the beginning of the Ukrainian War. It was published quickly after the publication of a Working Paper by  Isabella Weber and Evan Wasner, in which they discuss the notion of 'seller's inflation'. Lavoie's answer to this earlier contribution provides an original position, which is derived from a Kaleckian perspective. It is quite technical, but relatively short and concise, which makes it digestible even for non-specialist readers.

If you are interested in Weber & Wasner paper, I have published an editor's comment on this paper. 

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