Joseph Stiglitz’s systems analysis to fight inflation
Here is a good example of a clear and succinct systems analysis by Nobel Laureate Joseph Stiglitz. He describes the current economic uncertainty and how traditional economic policy models are not useful for policymakers in post-pandemic times. Policy responses require digging deeper and with a new mindset into the price system and its behaviour
Despite favourable indices, it is too soon to tell whether inflation has been tamed. Nonetheless, two clear lessons have emerged from the recent price surge. …. economists’ standard models — especially the dominant one that assumes the economy always to be in equilibrium — were effectively useless….There is overwhelming evidence that the main source of inflation was pandemic-related supply shocks and shifts in the pattern of demand, not excess aggregate demand, and certainly not any additional demand created by pandemic spending.
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One would hope that modern economic analysis would dig deeper … A careful look at what is going on, and at where prices have come down, supports the structuralist view that inflation was driven mainly by supply-side disruptions and shifts in the pattern of demand. As these issues are resolved, inflation is likely to continue to come down.
Read more @ The Guardian: How should you fight inflation? (Spoiler alert: not with interest rate rises)
