Olan Biten

I have been a little puzzled by how dominant certain views about inflation are. The quantity theory of money seems to be dominating a lot of circles, in some cases contrary to their own interests and contradicting their claims on other issues. Most descriptions of inflation outside economist circles try very hard to reduce it to a policy mistake (well, you see and hear this in our field too), a one-time event, etc. and I don't think they have bad intentions or an interest in doing so necessarily. "X caused Y" sells! Yet these stories take themselves so seriously that they sometimes seem to forget the definition of inflation and reduce it to changes in demand only. As always, this is a place where I feel like playing with some data and analytical models to throw out some ideas. Below, I'll run some simulations in a two-sector economy, without considering the accuracy of the analysis. Production Networks My starting point will be the commonly used production function in...