inflation

A rise in the general level of prices in an economy which, if it continues, must bring about an increase in the money supply. Economists have offered a number of different explanations for inflation, and though it is generally accepted that excess aggregate demand is typically responsible (‘too much money chasing too few goods’), there is no accepted version of how this situation is created in the first place. A major axis of debate is about whether inflation is demand-led or induced by rising costs. Among the factors said to contribute to the latter are excess money-wage increases, administered price increases, import cost rises, rigidity in the distribution of investment and resources between industrial sectors, and inflationary expectations. What does seem clear is that, although inflation does not affect the real value of average living standards, it tends to redistribute real living standards among groups in an arbitrary way according to their ability to adjust the money value of their incomes to the general rise in the price-level. This engenders social tensions and conflict and these consequences have also attracted the interest of sociologists.

Though early sociological studies of inflation claimed to be addressing unexamined residual categories in economic theory, most later accounts sought not to displace, but rather to supplement the work of economists. The inflation-causing factors emphasized as the basis of difference between inflation-prone and price-stable industrial cultures may be classed as normative and structural. The normative argument, clearly influenced by Emile Durkheim's concept of egoism, is that in a market society , inequalities in income are not governed by some moral standard of a fair day's work for a fair day's pay. They reflect, instead, arbitrary variations in the market power of both individuals and organized groups. The extent to which resentment is engendered will depend on the degree to which there is a general acceptance of individualism and competitiveness as values in themselves. Resentment, in turn, sets off leap-frogging attempts by groups to advance their relative standing.

However, the effect of normative causes will be mediated by various structural factors, notably the extent to which the differential ability of groups to enhance their incomes is stabilized or regulated by law and institutional controls that promote trust between groups; the productive capacity of the economy, especially the degree to which claims are pursued against a surplus that is growing rapidly, or is fixed or increasing only slowly; and whether gains in profitability are reinvested in income-earning industrial capacity or siphoned off into financial speculation whose returns are not enjoyed by the workforce at large.

The best summary of the sociological literature on inflation is’s Inflation and Social Conflict (1986).