INFLATION AS A PROCESS

After a critical examination of received views on price inflation, this major new book applies the notion of limited rationality to the dissemination of price movements between and within economic markets.

This application of the X-efficiency approach pioneered by Harvey Leibenstein is itself preceded by a careful analysis of the methodological issues raised by relaxing the neoclassical maximisation hypothesis.

The hypothesis is not rejected as false per se but as an inappropriate tool for analysis of the interdependencies and recursivities caused by various pricing strategies readily observed in actual markets. The result is a model of price and wage setters using empirically plausible pricing rules or conventions.

The model elaborates micro-level dynamics which have been obscured by studying inflation solely in terms of movements in aggregate arbitrary indices.