At Project Syndicate in providing his view of present inflation, Joseph Stiglitz largely echoes Alan Blinder’s views to which I linked earlier. Much of the piece consists of apologetics for the policy response that has taken place over the two years. These are good points:
The pandemic did expose a lack of economic resilience. “Just-in-time†inventory systems work well as long as there is no systemic problem. But if A is needed to produce B, and B is needed to produce C, and so on, it is easy to see how even a small disruption can have outsize consequences.
Similarly, a market economy tends not to adapt so well to big changes like a near-complete shutdown followed by a restart.
but, sadly, he does not provide any guidance on either subject. It takes him a while to get around to his “balanced response”:
A large across-the-board increase in interest rates is a cure worse than the disease. We should not attack a supply-side problem by lowering demand and increasing unemployment. That might dampen inflation if it is taken far enough, but it will also ruin people’s lives.
What we need instead are targeted structural and fiscal policies aimed at unblocking supply bottlenecks and helping people confront today’s realities. For example, food stamps for the needy should be indexed to the price of food, and energy (fuel) subsidies to the price of energy. Beyond that, a one-time “inflation adjustment†tax cut for lower- and middle-income households would help them through the post-pandemic transition. It could be financed by taxing the monopoly rents of the oil, technology, pharmaceutical, and other corporate giants that made a killing from the crisis.
I gather that he continues to belong to “Team Transitory”.







