Danger: When a Classical Scholar(/Ideologue) Discusses Inflation

Victor Davis Hanson, writing in a data-free commentary published by the Independent Institute : NOTE as of 7/26, the Independent Institute’s version of the article has disappeared; I add here another copy of the article, at some site called “American Greatness“. 10/26/2021, MDC.

Inflation Is a Mere Construct

We used to know what inflation was, its pernicious role in past civilizations, and how to combat it. The danger of worthless currency is a staple of classical literature from Aristophanes to Procopius. The scary fact is not just that we are destroying the value of our  money—the exploding price of gas, food, appliances, lumber, power, and housing are  overwhelming even Joe Biden’s entitlement machine—but that we are constructing pseudoeconomics to justify the nihilism.

Right now, we witness a multitrillion-dollar fight over borrowing beyond our $30 trillion debt  to build “infrastructure,” a word that has been expanded to include mostly anything but roads and bridges. What exactly is so liberal about the farmworker paying $5 a gallon for  gas to commute to the fields, the small contractor doing a remodeling job with plywood at  $80 a sheet, or the young couple whose loan qualification is always a month behind the  soaring price of a new home?

What the heck does he mean by “mere construct”? I think what he is alluding to is the following definition of a construct:

Social constructionism is a theory of knowledge in sociology and communication theory that examines the development of jointly constructed understandings of the world that form the basis for shared assumptions about reality. The theory centers on the notion that meanings are developed in coordination with others rather than separately within each individual.

Well, who I am I to criticize this argument? — I only took one sociology course in college. But it sure sounds like he’s saying “inflation” is whatever he — and his friends — say it is. Nonetheless, I can talk about inflation as a technical term, from an economist’s perspective.

[As an side, I think Dr. Hanson is a bit behind the time…I price 4’x8′-1/2″ at about $48 at Home Depot, and EIA lists a gallon (all grades) at $3.15/gallon as of 7/19 — maybe Palo Alto is a bit pricier.]

Inflation is an increase in the price level. More specifically, let Pt be the price level (defined over some basket of goods). Then inflation is the percent growth rate of that price level,

πt ≡ [((PtPt-1)/Pt-1)-1]x100%.

What does this construct look like in the United States over the two and a half years? Below I show the month-on-month annualized inflation rate (for data of monthly frequency, the calculation I use is πt ≡ [(Pt/Pt-1)12-1]x100%.

Figure 1: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI, nsa (brown), sticky price CPI (green), and 16% trimmed mean CPI (red). Seasonally adjusted Chained CPI calculated by author by applying arithmetic seasonal adjustment procedure to month-on-month log differences of n.s.a. Chained CPI. Source: BLS, Atlanta Fed, Cleveland Fed, via FRED, and author’s calculations.

And for the longer perspective:

Figure 2: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI, nsa (brown), sticky price CPI (green), and 16% trimmed mean CPI (red). Seasonally adjusted Chained CPI calculated by author by applying arithmetic seasonal adjustment procedure to month-on-month log differences of n.s.a. Chained CPI. Source: BLS, Atlanta Fed, Cleveland Fed, via FRED, and author’s calculations.

Survey based expectations of inflation (12 month) are shown in this post. July nowcast for m/m inflation is quite low, as shown in yesterday’s post.

For those who are unable to interpret growth rates, here is a graph of the purchasing power of a single dollar spent in a US city, based on the CPI.

Figure 3: Purchasing Power of the Consumer Dollar in U.S. City Average,, 1982-84=100, on a log scale (blue). This is FRED series CUUR0000SA0R. Source: FRED.

One can readily see that the loss of currency purchasing power is not particularly marked in the last year.

Finally, because no right-wing screed is complete without some conspiracy theory attached, I show an alternative price index (and corresponding inflation rate) based on online data, derived from the Billion Prices Project (described here by Jim), and drawn from an illuminating presentation by Alberto Cavallo at HBS. The blue line is the BLS series, the red PriceStats.

Source: Cavallo (June 2021).


Source: Cavallo (June 2021).

In other words, the CPI seems to not be too far off right now in terms of actual price developments that “people” face. (In this June 2021 presentation, he notes that while the CPI probably understated inflation in 2020, it probably overstates it in 2021.)

By the way, I don’t always disagree with Hanson. Here’s his last appearance in Econbrowser. To use a new-fangled phrase, perhaps he should “stay in his lane”. As for the Independent Institute, here is the last time a commentary from that organization showed up in Econbrowser.


45 thoughts on “Danger: When a Classical Scholar(/Ideologue) Discusses Inflation

  1. pgl

    Are we sure he did not cut and paste this from the latest appearance by Fox and Friends Chief Economist? He got the price of gasoline all wrong as well as the price of plywood. And who else would write the following Bombastic BS?

    ‘We used to know what inflation was, its pernicious role in past civilizations, and how to combat it. The danger of worthless currency is a staple of classical literature from Aristophanes to Procopius. The scary fact is not just that we are destroying the value of our money—the exploding price of gas, food, appliances, lumber, power, and housing are overwhelming even Joe Biden’s entitlement machine—but that we are constructing pseudoeconomics to justify the nihilism.’

    I bet Princeton Steve already copyrighted that passage!

  2. pgl

    Who left off the craziness part of his latest rant – the title:

    ‘The American Descent into Madness’

    OK Mr. Hanson has descended into madness but I interrupt:

    ‘America went from the freest country in the world in December 2019 to a repressive and frightening place by July 2021. How did that happen?’

    Three words – President Donald Trump!

  3. pgl

    An anti-immigrant screed that made me quite ill.

    the woke McCarthyite culture on campus? The critical race theory canard? Lord – this little essay was many times more disgusting than its incredible rant about the inflation rate.

    Could we have someone check on Mr. Hanson’s mental health?

  4. David S

    I wish I hadn’t clicked on the link to Hanson’s article because I will not be able to recover the brain cells that were killed by just glancing at some of his ravings.

    The great lumber bubble of 2020-2021 crashed a few weeks ago. Some speculators probably made some money on the run-up, and others lost some money on the way down. That’s what we call a “market” and we have to tolerate volatility in commodity prices from time to time.

  5. macroduck


    Hanson is an echo-chamber guy. Shelton was an echo-chamber gal until the echo-chamber president caught sight of her. (He’s gone and she’s back to trying to back the dollar with mandrake root futures.) Maybe it’s best to let such echoes die, if for no other reason than to spare your readers exposure to some remarkably gassy writing.

    1. Moses Herzog

      I can see both sides of it. Some people might say this is low-hanging fruit. But especially when the calls on inflation are used to con people into purchasing gold at bad times, or with exorbitant commissions, I still think it pays to call out the inflation scammers. There is a part of me that still likes to believe the occasional conservative can be swayed. Who would have ever though Bruce Bartlett would have been nudged as far as he has in the last 10 years or so?? (although one can strongly argue too little too late). Those cases of the the very rare Bruce Bartletts out there who can still be “won over” give hope. For them I feel these posts, and the “low-hanging fruit” are still worth highlighting from time to time.

      1. macroduck

        But…the WRITING! Oh, God, the writing! Sure, call out the odd charlatan, but uuuuchh! Not like that.

          1. Moses Herzog

            I can’t believe I had the strength to read all that, hahahahaha. I’ll tell you what will make a person sad reading that. Remembering how great Forbes was from around 1984–1990 (Prior I can’t testify to because I haven’t read many of the older issues), and how pathetic Forbes is now. I remember rushing to the mailbox to pick those up, or being the first thing I might pick up at the library. The old man, Malcolm, (you may be too young to remember, the one who was into hot air balloons and Fabergé eggs) was a really great editorial writer. Even if you disagreed with his politics he was fun as hell to read. Then doucheboy Steve took over and it was ALL downhill from there. As your link exhibits. I’m not ashamed to admit I learned a lot from that magazine in the era ’84–’90. Probably learned more reading one of those issues than I did in an average school week (admittedly that’s not saying much).

            It used to be Forbes was king of hardcopy business mags (with “Fortune” a relative close 2nd), Now Bloomberg Businessweek is hardcopy king. Showing my age there.

          2. baffling

            Bloomberg is now head and shoulders above the rest in the business world. things like forbes and fortune are much too littered with what amount to oped’s promoting somebody’s investment thesis, rather than legitimate analysis.

  6. ltr

    What the heck does he mean by “mere construct”?

    [ By “construct,” Victor Hanson is telling a reader that knowing history, any and all history, means simply knowing Thucydides. Sort of like being an Orientalist, as Edward Said explained, where all history a dynamic Western history that non-Western peoples have been unable to experience. Hanson is more limited than being an Orientalist. ]

  7. joseph

    What do Victor Davis Hanson and Judy Shelton have in common beside the Independent Institute? The “esteemed” Hoover Institution!

    Wingnuts of a feather flock together.

  8. pgl

    I went looking for some sort of objective bio on Hanson. What I got mostly was praise from Town Hall the National Review and other rightwing liars. OK – he has written about military history but check out how Veterans Today noted how Hanson left out all sort of details about that 2003 decision to invade Iraq:


    Hanson is not to be trusted on even his forte – military history. And then he writes garbage like this screed. Partisan piece of garbage. Which is why rightwing rags love this dude.

        1. Moses Herzog

          @ pgl
          It doesn’t put too much confidence in your source of information–“VT”—when they themselves state multiple times they take no responsibility for the content, validity, or accuracy of anything written on the site, and that it falls back on the authors. The guy you quote teaches math in South Korea. I’m not sure that exactly inspires confidence in your sourcing of materials. What’s the deal….. is your fav copy/paste website “TPM” having technical glitches today??

          1. Moses Herzog

            I can’t resist adding, this “VT” that pgl found, from the sub-basement sludge sector of the internet, may be the dumbest sourcing of “evidence” since Barkley Junior’s referencing “Quora” as if it was a bibliography notation in a research paper. And gives me near as many giggles.

          2. pgl

            Lord – you just love to pop up with your little whiney BS. How is your new relationship with Econned going? Has he proposed marriage yet?

          3. pgl

            BTW – did you actually READ the discussion in the link? Do you disagree with any of it? Oh no – you just noted it was not one of your preapproved sources. I guess you do live in Oklahoma where everyone is a closed minded bigot. I can see why Barkley thinks you are the worse commenter here. So excuse me for not using the praised from Town Hall and the National Review which are must more your cup of tea.

          4. Moses Herzog

            @ pgl
            Can you remind blog readers what state you were gracious enough to share with us you were BORN in???

            I’ll have to inform you I was born in a state north of that, and north of Oklahoma—with considerably higher literacy levels. If you found a lot of Georgia stuck with you (the Deep South Georgian in you does kinda show in your preferred reading materials, “Veterans Today”, who are even ashamed of their own content, “TPM” “Business Insider” etc…..), I’m afraid you’re projecting.

          5. Moses Herzog

            I do have to confess to being mystified…… with all the time pgl spends replying to all the commenters he says he “skips over”, how pgl ever finds the time to read articles about rightwing nutjobs written by expats in South Korea teaching math. On websites which legally disavow their own content on every page of their website, no less.

            I guess pgl is that good at prioritizing his time to fit the wisdom of “Veterans Today” into his daily reading. Even after “skipping over” the commenters he faithfully replies to.

          6. pgl

            Moses Herzog
            July 25, 2021 at 12:51 pm

            I ask this drunk troll to tell me what he objected to in that critical book review of Hanson’s account of the 2003 invasion of Iraq and what did this worthless idiot reply with? A comparison of wherever this troll was born v. where I was born (Atlanta). Look – old uncle Moses has indeed become the most worthless troll ever.

          7. Moses Herzog

            Strange….. I thought it was pgl who brought up the topic of states?? Guess that attempted dig didn’t quite go as planned: https://www.atlantamagazine.com/civilrights/the-integration-of-atlanta-public-schools/

            If you ask REAL nice pgl I’ll tell you what state I was born in, along with a link for comparison to Atlanta’s year of desegregation. You’ll find it’s better sourced with better writing than you’ll find on “Veterans Today” website and even your copy/paste “TPM”.

          8. Barkley Rosser


            I never heard of VT before, but your comment here is totally stupid. All they are saying is that they are open to publishing things by people who meet certain criteria without editing those writings themselves. Lots of outlets are like that.

            What this means is that one should judge a particular entry in a place like it on the merits of its author and its content. Now, as a matter of fact Jonas E. Alexis is a sort of odd character, although the problem with him is not that he teaches math in South Korea but that he seems to have some sort of weird super anti-Israel schtick that shades into outright anti-Semitism (those two not necessarily being the same), and has published several books on his obsession with this topic.

            That obsession does show up in this piece on Hanson, who has been strongly pro-Israeli, and it sort of distorts some of his discussion of Hanson. However, most of his critique of Hanson looks both correct and well informed, and pgl is completely correct in taking you to town for not actually analyzing the article itself rather than just indulging in half-baked snarks at VT and Alexis.

            BTW, I note that even such prestigious outlets as Science and Nature have from time to time had to retract articles for inaccuracies. While one should be able to trust them more regularly than say tabloids one finds at grocery store checkout counters that regularly report on the latest location of Elvis, not to mention that not only did Prince Charles kill Princess Diana but JFK as well, for any article or post one needs to look at it closely on its own rather than simply accepting or not based on where it appeared.

      1. Moses Herzog

        On the off chance anyone is confused by this comment, I’m pretty certain Kivlin meant to type Crimea instead of “crimes”

      2. Barkley Rosser

        Actually, paddy, there was a vote in Crimea after Russia had already taken control of the place. Because the Russians were running the vote, the opposition to Crimea joining Russia boycotted the vote, so, of course it was overwhelmingly in favor of the move.

        In 1991 there was a vote in Crimea over the same matter, with 54% supporting staying with Ukraine. Probably a majority did support going with Russia when they took it, although that might not be the case now. The problem was the poor performance of the Ukrainian economy compared with Russia’s, with the upshot being in particular that old age pensions were much lower in Ukraine than in Russia, and Putin promised the old people in Crimea they would get the more generous Russian pensions, a promise he delivered on. That was probably the key swing difference.

        Big joke on that is that it looks like Putin is not happy with that as costs of holding Crimea have proven quite high while for various reasons Crimea has not delivered on some economic benefits he and his pals hoped it would deliver. This may be part of the reason he has not bothered to annex those eastern Ukrainian “republics” he supports. Let them pay for their own bloody pensions.

        1. Moses Herzog

          I think the irony of the quote on the Crimea vote numbers was Kivlin’s entire point, only “amazingly” Kivlin took 3 sentences to say it instead of half a typed page. It’s amazing how succinct a person can be when not desperate to impress others.

          1. Barkley Rosser

            Oh gag, an even stupider comment coming out of you, Moses.

            My sole interest here was clarifying the situation regarding Crimea and the vote there, with Paddy’s comment on the vote situation unclear.. Paddy’s comment suggested maybe there was no such vote or something, given the quotation marks. It may be that he knows what I put here, that the vote happened after Russia took control and was boycotted the vote, but I suspect many readers did not know what he meant.

            So, Moses, when somebody puts something here that is short but confusing, it may take something a bit longer to make clear what the situation actually was.

            Oh, I’ll throw a tidbit not generally known but that I know from my inside connections with all that. When Khrushchev gave Crimea to Ukraine in 1954, while on the surface it was in commemoration of the forced alliance between Russia and Ukraine (forced by Russa) in a war in 1654 against Sweden. But there were two subtexts.

            The better known one is that Khrushchev had a guilt trip about Ukraine because of his role in the famine there in the early 1930s during the collectivization of agriculture. He himself was from the border between the two.

            The less well known I know from inside sources is that it was also a gift for Khrushchev’s mistress, Yekaterina Furtseva, whom he would appoint to be the first woman member of the Soviet Politiburo. She had close links to Crimea.

            So there, I put that to impress people. The earlier comment was simply to clarify, but you, Moses, seem unable to figures such simple things out.

          2. pgl

            “It’s amazing how succinct a person can be when not desperate to impress others”.

            So the reason you write so long winded babble is you are trying to impress us. OK Moses – we are impressed by how utterly worthless you can be. But we were impressed a long long time ago.

  9. William Baum

    Seems like there are at least 3 definitions for inflation out there: (1) percent growth of price level (measured variously as cpi, sticky cpi, pce deflator, chained cpi, trimmed cpi, etc.), (2) increase in money supply (but which: m1, m2, m3, mzm, base?) and credit marked to market, and (3) stuff you want to buy just costs more. Sure sounds like a social construct to me.

    1. Menzie Chinn Post author

      William Baum: But only (1) is a generally accepted mainstream economics definition. (2) is the definition of what I would say are iconoclastic, often uncredentialed, economists. (3) is the same as (1) when the index deflator matches the individual you’re talking about.

      1. Anonymous

        Ok, thanks. Leaving aside mainstream economists, iconoclasts and that mythical individual with the same index deflator as the official number, what do the rest of the people in a society think inflation is?

        1. baffling

          “what do the rest of the people in a society think inflation is?”
          one may argue, who cares? what is important is what those in charge of monetary and fiscal policy think inflation is, since they have a direct say in the matter.

      2. William Baum

        Ok, thanks. Leaving aside mainstream economists, iconoclasts and that mythical individual with the same index deflator as the official number, what do the rest of the people in a society think inflation is?

        1. Menzie Chinn Post author

          William Baum: Well, I have written on this several times. You can read this post. I agree that the CPI is not particularly representative; the weights conform to a household at about the 70th percentile of income. In addition, see Cavallo’s excellent June 2021 presentation based on the Billion Prices Project database.

          1. Moses Herzog

            I’m tempted to walk on very thin ice that I have ended up cracking and falling into polar waters in prior threads and say “I bet Menzie thinks……”

            Possibly many credential economists would answer the question: “what do the rest of the people in a society think inflation is?” with the Answer: “Whatever the rate of increase of price of the basket of goods that particular individual (or household) buys, but in their head measured more in a monthly fashion than a yearly fashion (most of the time).”

            Credentialed economists are welcome to chime in and tell me how I got my guess on credentialed economists’ thoughts wrong, in how “joe six-pack’s” mind works. [covers the top of my head with my hands and waits for the avalanche to start ]

          2. Barkley Rosser


            The main problem with what “the rest of the people think,” aside from that everybody has their own basket of goods they purchase, is that we know from many studies that most people tend to pay a lot more attention to certain items than to others, even though they may not be spending all that much on the ones they pay lots of attention to.

            So the ones they pay attention to are ones they regularly go to stores or other outlets to get, with those being notably gasoline and groceries. It is known they pay less attention to ones that come as monthly bills or are unusual and infrequent purchases. So, for better or worse, most people are not all that good at estimating even their own personal cost of living indexes.

      3. pgl

        But (3) is clearly Princeton Steve’s definition. After all – his entire diet now consistst of bagels.

  10. Manfred

    I know I am a low level person to criticize Menzie on his High Throne in a “school of public policy”.
    But I think, and I apologize in advance for anything and everything, (is this the right attitude in a left wing econ blog?), as I was saying, I think (again, with apologies) that Menzie misunderstood Hanson’s comment. Hanson is not calling inflation a construct. Hanson claims that the left wingers now running the country (those that defend the Progressive Ideological Narrative) claim that inflation is a social construct.
    I know that every time a left winger like Menzie is criticized by a non-left winger, the latter must apologize again and again. Because apparently this is the current Zeitgeist (that’s a German word, you know?). Hanson is claiming that for the left wingers now running the country inflation is not a problem, an illusion, a social construct.
    Like for example for Janet Yellen (do I have to apologize for criticizing her?) or Cecilia Rouse, a professor from Princeton. The message that Hanson wants to convey is that apparently Yellen, Rouse and perhaps Menzie, never heard of Milton Friedman’s Presidential Address, published in the American Economic Review in 1968.
    For Yellen, it is not a problem that the 12 month CPI reached over 5%, approaching inflation levels in Uruguay (which is now at 7%). Apparently, for Cecilia it is not a problem that inflation may reach higher, hopefully not, but could reach Argentinian levels (Argentina is a country in South America, you know?). For Yellen, Rouse and Menzie inflation is just an illusion, a social construct – just like Joe Biden, our President, claiming that Democrats were never in favor of defunding the police (you see, “defunding the police” is a social construct, an illusion, to critics of this administration) – same thing with inflation; it’s not a problem, something “transitory” that we need to suffer because Janet and Cecilia and Menzie say so. It’s an illusion and a social construct.
    But again, who am I to criticize. because I know, only supporters of this administration have the “correct” information. Anything and everything else is misinformation, including all criticism.

    1. Menzie Chinn Post author

      Manfred: Well, perhaps I’m confused by VDH’s article because I’ve never met a single left-winger (as you have described them) who has described inflation as a “construct”. Maybe you meet many of such left-wingers in Louisiana.

      I really have no idea what point you’re making. If you believe I’m a left-winger, then why am I arguing in this post that inflation is the first derivative of the log price level, and *not* a social construct. All very confusing.

      I *do* know that VDH’s comment about the difficulty for prospective first time homeowners to buy a house is a perfect example of a “construct” of inflation. The prices referred to inflation are usually prices of goods and services (the CPI is an anomaly insofar as it includes factor prices like rent).

    2. baffling

      “For Yellen, it is not a problem that the 12 month CPI reached over 5%, approaching inflation levels in Uruguay (which is now at 7%).”
      manfred, do you really think that 5% inflation, even over the course of 2 years, is a problem?

    3. Moses Herzog

      @ Manfred,
      You didn’t work for the government in any form or fashion, did you?? Say over many years?? (You can tell the exact number of years, personally, I feel taking a salary from Louisiana taxpayers to pick your nose all day is merely a “construct”) I feel it’s important to inform you that all the talented people of ability work in the private sector. So if you worked in government at any time, similar to Newt Gingrich. it simply means you’re a big loser in life. Don’t take it personally though, just get a job in the private sector like us smart people of high ability do, and quit living off the public dole. Reagan spent his early years in the Army fighting the Japs in Southern California, around the LA area~~collecting checks from “big government” similar to Conservative hero Timothy McVeigh. Well, except McVeigh actually did participate in a war instead of worshipping himself in the mirror like young Ronnie Reagan. Damn new generation. It was a rougher life for Reagan, convincing other men to sign up for death overseas, but when asked about it, Reagan said “It was just a social construct, that’s all”.

    4. pgl

      So many words and not a single honest insight. You may have set the world’s record for the longest troll rant ever!

    5. Barkley Rosser

      Sorry, Manfred, but Menzie is right and you are simply dead wrong, Not a single one of the people you claim to think that inflation is a “social construct” has ever said or written or argued in any form such nonsense.

      There has been a meme among some Post Keynesian economists to the effect that it may reflect an evolving social contract, not a construct. This is from those who have emphasized cost-side forces arising from labor-management relations, with these becoming important when an inflation becomes entrenched and one has unions pushing for much higher wages due to much highee prices. But that is not going on now, and that is not the same as a “social construct.”

  11. Moses Herzog

    @ Menzie
    There are tons of tipoffs that “American Greatness” is a cash scam for MAGA hat wearing white trash. But did you notice the real flare gun shot into the night sky at the bottom of the website declaring “This site is for born losers”??? They had a “Parler” account.

Comments are closed.