Hmm. I think I might be agreeing with you, but I think I need to unpack what we mean by “inflation” to make sure I’m not tripping myself up somewhere.
Suppose I need 10 kW to survive and power my computer, and spent all of my non-energy income on funny cat videos. We start off with me spending $10k on energy and $90k on cat videos, and I get 9,000 cat videos. We then move to me spending:
$11k on 10 kW, and $99k on 9,000 cat videos. (B)
$11k on 10 kW, and $99k on 9,900 cat videos. (A)
The first situation, once nominal changes in the value of the dollar are removed, is identical to the old situation, which is claim B. The second situation appears to have both real and nominal changes- a kW more costs me 990 cat videos when it used to only cost me 900 cat videos.
I think I’ve found a disagreement: what happens when the price of energy rises faster than GDP growth? Clearly there’s a real change going on, but I don’t think it has to be real GDP growth. (Suppose the number of dollars it takes to buy energy skyrockets, but it’s all “owed to ourselves” in that the static energy budget of humanity is split up in some egalitarian way, and the supply is completely inelastic with regards to price. GDP, as it measures both trade in energy and trade in services, seems like it could get arbitrarily high, and that the percentage of GDP devoted to energy would also approach 100% in that case.)
I think that Claim C does not follow from either Claim A or Claim B, and that the physicist means to assert Claim B. (I agree that B is true and claim that A is underspecified.)
It looks to me like this is the economist off his game. If you use energy as the currency, this issue becomes much, much easier to think about- and it becomes obvious that if you have economic growth (more cat videos per year) and a fixed energy supply (only 10 kW a year) that the price of energy must grow, not fall (one kW must buy more cat videos, not less; one cat video costs less kW, not more).
Hmm. I think I might be agreeing with you, but I think I need to unpack what we mean by “inflation” to make sure I’m not tripping myself up somewhere.
Suppose I need 10 kW to survive and power my computer, and spent all of my non-energy income on funny cat videos. We start off with me spending $10k on energy and $90k on cat videos, and I get 9,000 cat videos. We then move to me spending:
$11k on 10 kW, and $99k on 9,000 cat videos. (B)
$11k on 10 kW, and $99k on 9,900 cat videos. (A)
The first situation, once nominal changes in the value of the dollar are removed, is identical to the old situation, which is claim B. The second situation appears to have both real and nominal changes- a kW more costs me 990 cat videos when it used to only cost me 900 cat videos.
I think I’ve found a disagreement: what happens when the price of energy rises faster than GDP growth? Clearly there’s a real change going on, but I don’t think it has to be real GDP growth. (Suppose the number of dollars it takes to buy energy skyrockets, but it’s all “owed to ourselves” in that the static energy budget of humanity is split up in some egalitarian way, and the supply is completely inelastic with regards to price. GDP, as it measures both trade in energy and trade in services, seems like it could get arbitrarily high, and that the percentage of GDP devoted to energy would also approach 100% in that case.)
I think that Claim C does not follow from either Claim A or Claim B, and that the physicist means to assert Claim B. (I agree that B is true and claim that A is underspecified.)
It looks to me like this is the economist off his game. If you use energy as the currency, this issue becomes much, much easier to think about- and it becomes obvious that if you have economic growth (more cat videos per year) and a fixed energy supply (only 10 kW a year) that the price of energy must grow, not fall (one kW must buy more cat videos, not less; one cat video costs less kW, not more).