On December 2-3, 2022, the Political Economy Research Institute at the University of Massachusetts-Amherst (where I did my economics PhD) will be hosting a conference on “Global Inflation Today: What Is To Be Done?”1
I will be speaking on “Rethinking Supply Constraints,” a new project I am working on with Arjun Jayadev. Our argument is that we should think of supply constraints as limits on the speed at which production can be reorganized and labor and other resources can be reallocated via markets, as opposed to limits on the level of production determined by “real” resources. The idea is that this makes better sense of recent macroeconomic developments; fits better with a broader conception of the economy in terms of human productive activity rather than the exchange of pre-existing goods; and points toward more promising responses to the current inflation.
I was hoping to have a draft of the paper done for the conference, but that is not to be. But I do have a set of slides, which give at least a partial sketch of the argument. Feedback is most welcome!
Interesting! I’d be curious to watch a video if they wind up recording your talk.
Quick note–hope it’s not too late–slide 21 is a graph of auto component of recent inflation but is labeled “Mid-2001 rise in inflation was mostly auto prices” — should be “Mid-2021” right?
For slide 28–when you say “Within normal range of utilization, constant costs”–do you mean truly constant (i.e. the fixed, rather than the unit, costs dominate) or do you mean that unit costs are a linear constant in normal producion ranges, and increasing production beyond this point leads to superlinear marginal cost increases? I think the figure on slide 29 indicates you mean the latter, but I wasn’t sure.
Slide 31–“After period of positive or negative output gap, restoring target inflation and unemployment requires return to earlier growth rate, not earlier trend” — which, hey, that’s exactly what the chart on slide 7 shows!
I’m curious what form the “limiting large price moves” suggested in slides 30 and 32 could take (other than price controls/subsidies/rationing etc.)
In addition to the main thrust of the argument, the observation that labor market participation is a continuum, rather than something captured by the binary “employed/unemployed” measure–implicit throughout but most explicit in slide 27–is really insightful.
Thanks for this!
Thanks for the comments – corrections were made. let me check on the status of the video.