The Austrians special language

Yes, We Have No Banana

Paul Krugman, NYT
July 21, 2014 7:54 am

Noah Smith has a funny piece on the hermetic system that is Austrian economics, with its multilayered defenses against any kind of criticism. What gets me in particular, because I’ve noticed it a lot lately, is this:

3. “Inflation” doesn’t mean “a rise in the general level of consumer prices,” it means “an increase in the monetary base”, so QE is inflation by definition.

So when Austrians were predicting runaway inflation, they didn’t actually mean consumer prices?

OK, you know that if the CPI had soared, they would have claimed vindication. But the main point is that nobody else cares about the monetary base, or at any rate they care about it only to the extent that it was presumed to say something about future rises in the CPI. Insisting that the term “inflation” means something else in your private language is just pathetic.

But maybe it would have helped, five or six years ago, to have pinned Austrian down on what they thought would happen to something else; following Alfred Kahn, they could have called a general rise in the CPI a banana. Were they predicting a banana? Of course they were. And they were wrong.

(The article is here.)