As Mark Blyth and Nicolò Fraccaroli explain in Inflation: A Guide for Users and Losers, the academic economics profession has since the 1970s constructed a self-congratulatory delusion about the role of central bank inflation targeting and central bank independence. “[O]ur underlying theories of inflation are quite fragile,” they explain, resting less on rigorous science than on partisan humanities — namely, history. And it is precisely to mask this fragile intellectual foundation on which “the field as a whole not only agrees . . . but upon which it bases many of its core concepts and hence its authority claims” that the intellectual politics of inflation have become so closed with its return since the coronavirus pandemic.

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Arguing the point requires what Blyth and Fraccaroli call “inflation storytelling,” the narratives constructed to explain causal relationships in the price system. For “team transitory,” during the pandemic inflation, the story was that the price level rise was a one-off event. “Let markets work” was a common refrain of progressive economists opposed to Federal Reserve interest rate increases in late 2021: having jumped from 1.3 to 6.2 percent in the first ten months of 2021, the inflation would slow and come down as supply caught up to demand on its own. In the terms of economic theory, inflation “expectations” remained “anchored.”

“Team permanent,” their intellectual opponents both within the White House and among its partisan enemies, told different stories: excessive government spending from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan was raising household spending or creating a disincentive to work, reducing supply; too-tight labor markets from lockdowns, or lazy or greedy workers, were pushing wages up too far, too fast. In economic theory terms, “expectations” were becoming “de-anchored.” The ease with which national broadcast media slipped into the “labor shortage” hysteria of late 2021 and 2022, as the inflation accelerated, demonstrated the stakes of these narratives. The failure of the 2021–22 Congress to pass a budget for the administration’s first full fiscal year until ten months after it began demonstrated their effectiveness.

Economics is pseudo-science