Skip to main content

Inflation is Always and Everywhere.........................

The latest ONS inflation figures for the UK show a rise from 2.4% to 2.7% (annualised). This rise doesn't surprise most consumers. One thing which my wife (who is not an economist) has pointed out to me is that the marked price of many products is not going up, but the quantity of product being sold has been reduced. For example, Twix bars are getting smaller, there are 8 slices of cheese instead of 10 in many cheese-slice packets, and Shloer bottles have gone from being 1 litre to 750ml. These changes may fool some consumers into thinking that there is no inflation, but in reality there is. What about the price of services or other more complex products? Could firms be reducing quality rather than increasing price? It is hard for CPI measures to pick up a deterioration in quality, which means that inflation can be underestimated.


Popular posts from this blog

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .