Doug French

Parents probably dream of sending their kid to the University of Chicago. Next to the Ivy League or Stanford, the Chicago school is near the top of the heap. Only 27 percent of applicants are admitted. To be among the roughly 15,000 means prestige and an education to build a lifetime on. The cost for tuition and fees: $39,381. Room and board is another $12,000 or so. Add books and other stuff, and the total Chicago-school experience costs $54,290 a year.

Students learn from the likes of University of Chicago economics professor Casey B. Mulligan, who believes what the economy needs right now is a little inflation in all the right places to make things better. Professor Mulligan writes for the "Economix" section of the New York Times, which goes about the task of "Explaining the Science of Everyday Life."

Mulligan writes that normally inflation is harmful, but "these days inflation may do less harm than good." He points out that the prices of most goods march upward over time and that this "general increase in consumer prices is called inflation." Of course that's not true. The increase in prices is the result of inflation, which is the increasing of the supply of money: thus the term "inflating" the money supply.

The Chicago economist then writes that the Federal Reserve is charged with limiting inflation, "which it can do over the long run by limiting the supply of money and similar assets in the hands of the public."

In the long run, the Federal Reserve has decimated a dollar's value down to 2 cents in the just short of a century it has been around. In August of 1971, M2 money supply was $685 billion, in March 2011, M2 was $8.9 trillion.

Mulligan writes that people complain about rising prices, but forget that their wages are going up at the same time, so consumer purchasing power is unharmed. Inflation-adjusted wages have been flat to negative. It has taken two incomes to pay for a household for decades now. Perhaps Mulligan should get out more.

Seniors should quit bitching, according to Mulligan because, "Social Security benefits automatically increase with wages in the economy, and thereby automatically increase with inflation in the long run." However, according to Social Security Online, "Under existing law, there can be no COLA [cost-of-living adjustment] in 2011." Why?


Doug French

Doug French is is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth

Be the first to read Bill Barker’s column. Sign up today and receive Townhall.com delivered each morning to your inbox.