How come nobody says "THAT'S WHY GROWTH IS SLOWING!"

I'm still working on posts for my "Terms of the Times" series. It's slow going. Everything about the economy is related to everything else, and I'm trying to find a path through it all. I often go off on a tangent. I'm starting to cut these tangents off and, rather than deleting them all, posting some of them so you know I'm not dead yet. Anyway, this is one of them.

It is starting to make sense to me, finally, this focus on cost-push inflation as "the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production". It is the most important difference between cost-push and demand-pull, this phrase "decrease in aggregate supply" that they now use in definitions of cost-push inflation.

Of course I've known for a while now that rising cost hinders growth:

The growth-side problem is rising cost. Rising cost inhibits growth. And it turns out that creating some inflation compensates for rising cost and gets us a little growth.

But I started out with an older definition of cost-push inflation, such as you can still find at policonomics:

Cost-push inflation occurs as a response of agents raising prices to maintain their profit margins if there are higher production costs.

The old explanation makes it clear that the problem is rising cost and falling profit. But it took me a while to figure out that cost problems hinder economic growth. I'm never quick, coming to realizations like that on my own. These days, they put it right there in the definition, as Investopedia does, the decrease in aggregate supply stemming from an increase in the cost of production.

Never quick. I know they're not making things up. I know that the decrease in aggregate supply -- the slowdown of economic growth -- results from the cost pressure. But my response to the revised definition, for the longest time, is: No.

Even now, when Investopedia defines cost-push inflation as "decrease in the aggregate supply" I want to say No. I want to say inflation is not supply. Inflation is prices. Inflation is prices going up, not supply going down. Yes, I know, price and supply are related. But no, inflation is not a change in supply.

God, there are still people who say inflation is an increase in the quantity of money. When I came to it, inflation was already an increase in prices, the general level of prices. People who grew up with the older view than mine object to thinking of inflation in terms of price, apparently because it severs the connection where increasing the money causes the increase in prices. Or maybe because bringing up the older definition seems (to those people) a strong argument that says the money inflation causes the price inflation.

And here I am, just like those guys, grumbling about a revised definition.

Here's a question. If they do all the work for you now, so you don't have to realize for yourself that cost-push inflation slows the economy, how come nobody says "THAT'S WHY GROWTH IS SLOWING!" How come there are a million explanations of slowing growth, and none of them identify cost pressure as the problem?

This whole evolution of the old "cost-push" idea into the "supply side" inflation driven by "supply shocks", this has to have originated with supply-side economists. And apparently it was adopted by the descendants of the post-war Keynesians. Okay.

But how come these days they all say cost-push makes the economy slow, and none of them say WOW THAT MUST BE WHY OUR ECONOMY IS SLOW! or even MAYBE THAT'S WHY...

I dunno. Maybe the reason goes something like this?

• They define "inflation" as not just a jiggle in prices, but a "sustained" increase.
• They change the name from "cost-push" inflation to "supply side" inflation.
  
• They define supply side inflation as caused by "shocks".
• They observe that supply shocks are "temporary".
• They conclude that supply shocks  do not cause inflation because inflation is "sustained".
• Far as I can tell, they never consider the possibility that cost-push might arise from something other than shocks. And
  
• They never consider the possibility that "sustained" cost-push could exist.
  

Hey, you can define cost-push inflation out of existence, if you want to. But that doesn't make cost pressure go away,

I know some economists talk about "conflict" inflation and "built-in" inflation and "inflation expectations". These are ways to take a temporary inflation and turn it into sustained inflation. Not sure, but I think these discussions come mostly from the descendants of the 1960s Keynesians and from Marxists or "Marxians" (I sure do wish the names of things didn't keep changing) -- and these are the economists that should be most willing to accept the idea of sustained cost-push inflation.

Well, certainly, if a temporary supply shock leads to built-in inflation, then you've got sustained inflation. But the cause of this sustained inflation is not the same as the cause of the temporary inflation that started it. And I don't see that the sustained inflation that results is necessarily cost-push or supply-side inflation. I don't see that, at all.

I dunno. I've not looked into these things enough. But it seems to me that if you are concerned about the cost pressure that underlies cost-push inflation, you're wasting your time when you adopt a story that wanders away from the cost-pressure story just so you can explain "sustained" inflation. 

To each his own, I suppose.