Austrians and the Definition of “Inflation” Again

Updated

The Austrians have an obsession with the definition of the word “inflation”: they want to define it as an increase in the money supply, instead of (as people normally use it) a general increase in prices.

In support of this, they assert that this was the “original” definition of “inflation.”

Some historical research suggests the word “inflation” has always been used to describe a general increase in prices, as well as an expansion of the money supply. This can be clearly seen to anyone who does a few minutes of searching on Google Books for the word “inflation” in the 19th century, or in Google Ngram Viewer.

The following graph (which needs to be opened in a separate window to be read properly) shows the usage of the expressions “inflation of money,” “inflation of currency,” “inflation of prices,” “inflated prices,” “inflation of the currency,” and “inflation of the money” in Google Ngram Viewer.

These expressions appear in the 1830s and 1840s in English writings, but it is extremely difficult to see how either sense was the “original” or formally correct usage.

In fact, the expressions “inflated prices” and “inflated price” seem to appear even in the 18th century and the early decades of the 19th century, so that the word “inflate” and its derived forms were clearly connected with prices from an early date. For example, there are explicit examples of this usage in the English translation of Jean Baptiste Say’s A Treatise on Political Economy (1821):

“We have hitherto regarded the inflated price of grain as the only evil to be apprehended. But England, in 1815, was alarmed by a prospect of an opposite evil; viz, that its price would be reduced too low, by the influx of foreign grain.”
Say, Jean Baptiste. 1821. A Treatise on Political Economy; or, The Production, Distribution, and Consumption of Wealth (vol. 1; trans. by C. R. Prinsep from 4th French edn.). Longman, Hurst, Rees, Orme, and Brown, London. p. 296.

“The experience of English commerce has, however, proved, that a casual inflation of the price of domestic, and depression of that of external products, may be the basis of permanent commerce.”
Say, Jean Baptiste. 1821. A Treatise on Political Economy; or, The Production, Distribution, and Consumption of Wealth (vol. 1; trans. by C. R. Prinsep from 4th French edn.). Longman, Hurst, Rees, Orme, and Brown, London. p. 176.

Moreover, a sample of writing from the 1830s onwards shows how “inflation” was used in the sense of price inflation from the beginning:

(1) 1835:
“It may be that the dumping of stock on the market may serve to check an excessive inflation of prices. When stocks are on the rise I do not believe the operation has material effect. It appears to be done mostly when stocks are on the decline.”
1835. Public Documents of the Legislature of Massachusetts. Volume 2. Russell and Cutler, Boston. p. 27.

(2) 1838:
“Might not the prevalence of a speculating mania the withdrawal of considerable labour from productive employment, and the expansion of bank issues, be particularly included among the causes which contributed to the inflation of prices?”
O’Reilly, Henry. 1838. Settlement in the West: Sketches of Rochester: With Incidental Notices of Western New-York. W. Alling, Rochester. p. 363.

(3) 1839:
“The artificial inflation of prices, from the previous abundance of paper currency, had created a great demand for specie to be exported, in order to purchase commodities abroad at rates which would afford enormous profits under the existing scale of prices here.”
Holly, D. W. and Conrad Swackhamer. 1839. The United States Magazine and Democratic Review. Volume 6. Langtree and O’Sullivan, Washington, D.C. p. 116.

(4) 1839:
“But while we express ourself, as strongly in favor of measures tending to secure to the cotton growing States independence of the Bank of England, (or any like bank any where else) and such, as will place them above fear of any combinations of private capitalists, we do not by any means wish to be understood to advise, or countenance any arrangement on this side the Atlantic, which has for its object an unreasonable inflation of prices.”
Carroll. B. R. 1839. The Southern Agriculturist and Register of Rural Affairs; Adapted to the Sothern Section of the United States. Vol. XII. January 1839. No. 1. A. E. Miller, Charleston, S.C. pp. 424–425.

(5) 1840:
“The question recurs, what were the causes of the unusual mania of speculation — the excessive and long continued inflation of prices, and the confidence that this inflation, after it was known to be excessive, would continue, and the expectation that it would still further increase?”
Hale, Nathan (ed.), Chronicle of Events, Discoveries, and Improvements, for the Popular Diffusion of Useful Knowledge Nathan Hale. S. N. Dickinson, Boston. 1840. p. 11.

(6) 1840:
“The operations of the Government from 1812 to 1815, gave the impulse to the expansion of business and the inflation of prices ...”
1840. An Examination of the Principles of the Independent Treasury Bill, the Objections urged against it, and the Antagonist or Bank System of the Opposition in the Speech of Isaac Parrish of Ohio. Globe Office, Washington. p. 5.

(7) 1843:
“That inflation of circulation and consequent inflation of prices was caused by ‘Democratic policy’, which gave to us the State banks, and stimulated them to extravagant emissions of paper; but. no sooner was the object accomplished. than the popular prejudice which was awakened by the appeals of demagogues against the United States Bank;”
Blair, Francis Preston and ‎John Cook Rives (eds.). 1843. The Congressional Globe Containing Sketches of the Debates and Proceedings of the Third Session of the Twenty Seventh Congress. Volume XII. Globe Office, Washington. p. 170

(8) 1851:
“When the volume of money is enlarged, prices rise; the rise of prices, by producing an apparent general prosperity, engenders a spirit of speculation; speculation produces an augmentation of credits, and since an increase of purchases on credit do not require, until a future period, a corresponding increase of money to pay for them, it follows that the inflation of prices is, by the mischievous influences of credit, often carried far beyond the point at which they would be arrested under a system of cash payments.”
Opdyke, George. 1851. A Treatise on Political Economy. G.P. Putnam, Broadway, New York. p. 325.

BIBLIOGRAPHY
Blair, Francis Preston and ‎John Cook Rives (eds.). 1843. The Congressional Globe Containing Sketches of the Debates and Proceedings of the Third Session of the Twenty Seventh Congress. Volume XII. Globe Office, Washington.

Carroll. B. R. 1839. The Southern Agriculturist and Register of Rural Affairs; Adapted to the Sothern Section of the United States. Vol. XII. January 1839. No. 1. A. E. Miller, Charleston, S.C.

Opdyke, George. 1851. A Treatise on Political Economy. G.P. Putnam, Broadway, New York.

O’Reilly, Henry. 1838. Settlement in the West: Sketches of Rochester: With Incidental Notices of Western New-York. W. Alling, Rochester.

Say, Jean Baptiste. 1821. A Treatise on Political Economy; or, The Production, Distribution, and Consumption of Wealth (trans. by C. R. Prinsep from 4th French edn.). Longman, Hurst, Rees, Orme, and Brown, London.