What is inflation? The answer seems obvious: when things get more expensive, that’s inflation, and it’s bad. But an alternative view is Milton Friedman’s. In a talk in 1963, the hugely influential economist defined inflation as “a steady and sustained rise in prices” and added that “inflation is always and everywhere a monetary phenomenon”.
The distinction matters. Consider two scenarios that might illuminate it. In both of them, consumer prices have increased by 10 per cent over the past year.
