No. Inflation is primarily caused by the government printing money, not by rising wages.
If wages rise but productivity does not increase, yes, that will cause inflation, but if productivity is not increasing wages cannot rise because there is nowhere for the increased wages to come from.
If wages rise because productivity is increasing, there are more goods and services available, so supply keeps up with demand and prices don't rise. (In fact they will generally fall in the areas where productivity is increasing, if the money supply is not being messed with.)
> Wouldn't it also be true that as certain goods deflate in price, labor force participation should go up as well since the same wage allows you to buy more stuff?
There will probably be more people willing to work, yes. Whether that translates into more actual jobs will depend a lot on how easy it is to start new businesses, since that's where the new jobs will have to come from. Our current regulatory regime makes it much more difficult than it should be to start new businesses.
> wealth isn't the money you have, it's what you can buy. Today most people, even those at the bottom, have access to many things today than even John D. Rockefeller didn't have access to when he was alive.
This is a very good point, which I wish more people would recognize.
Intuitively, printing money can't be the only cause at least at a non-macro level. If all the wealth currently currently squirreled away in places that banks can't trivially lend out (art, real estate, etc.) were instead cash in the hands of the lower and middle classes, I would expect a lot more money to be chasing those goods and services against which we measure inflation. This demand-pull inflation against the goods and services we use to measure inflation would cause the measure of inflation to rise and everything that indexes against this measure would adjust.
A change in the savings ratio could also cause demand-pull inflation without an increase in printing money. As could a change in reserve requirements.
There are also cost-push inflation from things like oil supply shocks, poor farm yields or changes in exchange rates.
I would also expect changes in the aggregate balance of payments between a country and all its trading partners to impact inflation experienced by people in that country.
> Intuitively, printing money can't be the only cause
Theoretically it certainly can be. To take the simplest idealized example, if the production of goods and services is unchanging, and people's needs are unchanging, the only possible source of price changes is a change in the money supply.
In the real world, of course, the quantity of goods and services does change and so do people's needs. But that just means the price system now has a genuine function: to inform people about the changes in supply and demand through changes in prices. Messing with the money supply just obfuscates those price signals with an arbitrary quantity of noise. So while it's true that messing with the money supply isn't the only cause of price changes in a real economy, that's certainly not an argument that printing money is okay.
> If all the wealth currently currently squirreled away in places that banks can't trivially lend out (art, real estate, etc.) were instead cash in the hands of the lower and middle classes, I would expect a lot more money to be chasing those goods and services against which we measure inflation.
That would depend on where the cash came from. In the case of real estate, for example, if you want a mortgage, the government will print most of the money (all but the three percent or so that banks in the upper reserve tranche have to put up--but IIRC even that minimal requirement was waived by the Fed fairly recently). So turning real estate into cash (by, say, taking out mortgages to buy homes from lower and middle income people who have more house than they want or who would rather rent instead) just means the government prints more money. Which will indeed increase average prices, but that's just an example of what I was talking about.
If, OTOH, you're talking about something like auctioning off expensive art works and using the money to start a business that employs people, so those people now have more cash to spend, that just means a transfer of cash from whoever buys the art works. That won't affect average prices at all; it will, however, increase the price of art works (assuming that the supply of those is basically static) and decrease the price of whatever things the people who bought the art works would have bought instead. Those two changes will cancel out on average.
I think we're talking past each other here. I don't disagree with you at all on a theoretical level. Yes you need more money chasing the same goods.
I'm talking more about on a practical level in terms of the prices that most people will see/experience when they are going about there daily life. I even cited very real examples of both demand pull and cost push inflation that have nothing to do with the money supply. These as far as I know are all examples acknowledged by economists as causes of inflation.
If for example tomorrow there were a super volcano explosion and a catastrophic decline in the world's food supply, we would see a massive spike in food costs. Everyone needs to eat and the food supply would be limited, so prices will go up. Since food costs are an input cost for the well being of all workers around the world, we should expect that there will be upwards price pressure on many goods and services used to measure inflation most people actually feel and experience.
> I'm talking more about on a practical level in terms of the prices that most people will see/experience when they are going about there daily life.
It's quite true that people are used to seeing a particular price level, and changes in either direction tend to cause them problems, even though, abstractly speaking, decreases in prices should be seen as a good thing.
> I'm talking more about on a practical level in terms of the prices that most people will see/experience when they are going about there daily life. I even cited very real examples of both demand pull and cost push inflation that have nothing to do with the money supply. These as far as I know are all examples acknowledged by economists as causes of inflation.
And this is a misuse of the term "inflation", because "inflation" is supposed to be bad, and so economists are basically trying to argue that the natural ups and downs of business, which are unavoidable in a world where things are constantly changing and nobody has a crystal ball, are bad things that the government needs to intervene to stop. We would all be much better off if economists would stop peddling such nonsense and just frankly admit to us all that, well, the natural ups and downs of business are unavoidable in a world where things are constantly changing and nobody has a crystal ball--not even economists.
> If for example tomorrow there were a super volcano explosion and a catastrophic decline in the world's food supply, we would see a massive spike in food costs
Yes, and what would happen next?
In a sane world, what would happen is that entrepreneurs would start figuring out ways to produce more food, because there is obviously a huge need for that, as shown by the huge price signal in food. Maybe they would build huge greenhouses with solar lamps powered by nuclear electricity. Maybe they would figure out how to harvest algae in quantity to make algaeburgers.
In our actual world, what happens is that governments wring their hands and pontificate and monkey with the economy and make things worse instead of better.
> To take the simplest idealized example, if the production of goods and services is unchanging, and people's needs are unchanging, the only possible source of price changes is a change in the money supply.
There are other possibilities. Suppose that employers gain bargaining power relative to the workers, but people are really resistant to taking a pay cut. The employers all raise prices instead.
Not in that particular hypothetical. All the things you cite are only relevant in a world where things do change. So if you want to talk about that world, it's pointless to respond to a hypothetical of mine where that kind of change is ruled out to make a particular point.
> Suppose that employers gain bargaining power relative to the workers, but people are really resistant to taking a pay cut. The employers all raise prices instead.
In the real world, where things do change and everyone knows and expects that, how do employers magically "gain bargaining power relative to the workers"? The only way that can happen, if the government is not messing with things (the money supply, but also other things, like the laws and regulations that govern employment), is for some technological change or some exogenous factor to favor employers over workers. And if that happens, and you're a worker, yes, you just got blindsided by change, and if you're an employer, you just got an unearned benefit (assuming you're not the one who actually invented the technological change). Welcome to the real world.
Of course, in the real real world, where the government does mess with things, there are plenty of ways for employers, particularly large corporations that have lots of cash, to gain bargaining power over workers without having to do anything to earn it. And yes, workers would probably be resistant to taking a pay cut, since they know that the bargaining power the employers are trying to use against them was not earned. And yes, employers would probably raise prices instead. And the best way to prevent all that is for the government to stop messing with the economy, so employers can't buy their way out of bad business practices.
> ...is changes in expectations about future needs or productivity.
Which are only rational if such things in fact have changed in the past. In that particular hypothetical of mine, they don't. And everyone knows that, the same we we all know in the real world that such things do change. That doesn't require omniscience; it just requires ordinary knowledge of the past and common sense.
Of course in the real world, as I just said, such things do change; but, as I said in my earlier post, that just means that monkeying with the money supply masks real price signals that should not be masked.
No. Inflation is primarily caused by the government printing money, not by rising wages.
If wages rise but productivity does not increase, yes, that will cause inflation, but if productivity is not increasing wages cannot rise because there is nowhere for the increased wages to come from.
If wages rise because productivity is increasing, there are more goods and services available, so supply keeps up with demand and prices don't rise. (In fact they will generally fall in the areas where productivity is increasing, if the money supply is not being messed with.)
> Wouldn't it also be true that as certain goods deflate in price, labor force participation should go up as well since the same wage allows you to buy more stuff?
There will probably be more people willing to work, yes. Whether that translates into more actual jobs will depend a lot on how easy it is to start new businesses, since that's where the new jobs will have to come from. Our current regulatory regime makes it much more difficult than it should be to start new businesses.
> wealth isn't the money you have, it's what you can buy. Today most people, even those at the bottom, have access to many things today than even John D. Rockefeller didn't have access to when he was alive.
This is a very good point, which I wish more people would recognize.