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But its all the same mechanisms ~ demand and supply in flex price markets and price leaders increasing prices in fix price markets. No matter what is driving inflation, it always has to go via those mechanisms.

OK, I'll buy that. But that doesn't answer the question of what causes fixprice actors to change their prices, or how prices are determined in the flexprice sector in an economy that includes a fixprice sector as well.

If you have a pet theory that has to always be the cause, it gets tricky how to squeeze the right answer out of the data, but if you are actually looking for which of the causes are stronger at a particular point in time, you tell that from the data the same way you sort out any other cause in historical time.

Except you can't, unless you have an idea about what different sorts of causes inflation can have, and how they should show up in the data, if they are actually there. There is no theory-neutral way to decompose a data set.

So, I'd like to understand as many possible theories of inflation as I can, and what they would predict about the data if they were true.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Nov 19th, 2010 at 10:56:49 PM EST
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