The Anti-Concepts of Money: Stagflation

If you’ve read the Inflation essay from this Anti-Concepts of Money Series we can now discuss the Anti-Concept of Stagflation.

The Anti-Concept of Stagflation

 Stagflation. This is a curious term. Wikipedia’s definition has the tell-tale signs of an anti-concept: 

“In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.” 

All situations in which the anti-concept of inflation is occurring for whatever reason, while at the same time there’s little economic growth for any or no reason, and also unemployment is high by some standard for an unstated cause which could be anything from destructive labor laws to a war that has destroyed all the factories—all these situations are united into this one word. Or the word attempts to unite them. Might as well trying to unite water and oil into one word, plus fire and ice, poison and food, and lying and truth too! 

The Inflation Unemployment Tradeoff

Keynesian economists hold that inflation and unemployment are a tradeoff. When they assert this as an explicit premise, one can challenge it. One could point to the 19th century which was not characterized by runaway rising prices as in the post-war years when this term was coined. In the 19th century, structural unemployment was unknown. 

This anti-concept smuggles the premise. By the very acceptance of the definition, one implicitly accepts the premise. One takes Keynesian economics on board. Including its demand that the government impose a monetary policy. 

Wikipedia goes on to state that stagflation: 

“presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.” 

Picture, if you will, an 18th century doctor attempting to cure a patient weak from fighting a systemic infection by bloodletting. The treatment further weakens the patient. If the doctor persisted, he would kill the patient. 

Instead of 18th century pre-science quack medical doctors doing no good and often doing harm, we have 21st century pre-science quack monetary doctors doing no good and often doing harm. And the doctor has a choice, by his own stated premises and the smuggled premise of this anti-concept, of either inflicting further harm on consumers by raising prices, or else inflicting further harm on workers by raising unemployment. 

Hiking the interest rate is a good way to inflict both harms at once.

Ayn Rand wrote this about the anti-conceptual mentality: 

“The main characteristic of this mentality is a special kind of passivity: not passivity as such and not across-the-board, but passivity beyond a certain limit—i.e., passivity in regard to the process of conceptualization and, therefore, in regard to fundamental principles. It is a mentality which decided, at a certain point of development, that it knows enough and does not care to look further. What does it accept as “enough”? The immediately given, directly perceivable concretes of its background…

To grasp and deal with such concretes, a human being needs a certain degree of conceptual development, a process which the brain of an animal cannot perform. But after the initial feat of learning to speak, a child can counterfeit this process, by memorization and imitation. The anti-conceptual mentality stops on this level of development—on the first levels of abstractions, which identify perceptual material consisting predominantly of physical objects—and does not choose to take the next, crucial, fully volitional step: the higher levels of abstraction from abstractions, which cannot be learned by imitation. (See my book Introduction to Objectivist Epistemology)… 

The anti-conceptual mentality takes most things as irreducible primaries and regards them as “self-evident.” It treats concepts as if they were (memorized) percepts; it treats abstractions as if they were perceptual concretes. To such a mentality, everything is the given: the passage of time, the four seasons, the institution of marriage, the weather, the breeding of children, a flood, a fire, an earthquake, a revolution, a book are phenomena of the same order. The distinction between the metaphysical and the man-made is not merely unknown to this mentality, it is incommunicable.”

To which list, I add the inevitability of high inflation if there is low unemployment. 

Stagflation as Evidence of the Impossible

And, of course, this mentality is befuddled whenever something occurs that it had assumed was self-evidently impossible. It cannot grasp that there are different causes of inflation, and different causes of unemployment. It believes that it can directly perceive that increasing the money supply causes inflation. 

Instead of checking and challenging these premises, it tosses another anti-concept onto the big heap of anti-concepts it has already accrued. Stagflation. 

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