As usual, Larry White’s excellent and clear writing allows even a general audience to easily understand the concepts. He explains this simply and accurately.
But George, while you are technically correct, I still think the main emphasis and points made by both Cochrane and Hayek hold. They push back on the notion that inflation is typically caused by what most people think causes it. In the end, it boils down to monetary policy. That is the big game in town, not generally oil shocks, crop failures, labour unions, or even increases in import tariffs.
The definition Larry uses is key: Economists use the term “inflation” to denote an ongoing rise in the general level of prices quoted in units of money.
The word “ongoing” is doing a lot of work here. In my view, this is what Hayek and Cochrane are both focused on despite the technically incorrect wording. I carefully read John Cochrane’s Hoover article, and it is almost identical to Hayek’s claim you quoted.
Yes, both economists go a little too far, but Milton Friedman also often embellished in non-technical public intellectual articles to make a similar point. Friedman seldom emphasised the demand for cash balances and velocity in these articles. He couched these as transitory variables not having much effect on longer-term (decadal) historical bouts of inflation.
Post-2008, increased demand for money did suppress inflation for years despite several rounds of QE, but this might have been partially induced by the profound change in the Fed operating system and interest paid on reserves.
That was monetary policy too. It is essentially errant government policy driving both inflations and (often in combination with bad fiscal policy) prolonged recessions or depressions. You yourself have argued that the anaemic recovery after 2008, with spending growth lagging behind trend for perhaps 7-8 years, was caused by errant monetary policy.
And if there was ever an aggregate supply shock affecting total output, it was in 2020 due to Covid. But here, the Fed was too loose too long, and there is still debate about how much of the short but acute bout of high inflation that followed was due to supply chain disruptions and how much was due to good old-fashioned loose monetary policy. Even by an NGDP metric, spending way overshot the trend. So again, maybe not all, but bad government policy essentially drove the post-Covid inflation, boosted by a big (very unnecessary) fiscal stimulus of deficit spending.
So while you have made the professor’s point and severely critiqued the phrasing in two non-peer-reviewed public intellectual pamphlets and essays by Hayek and Cochrane, I’m left wondering about the motivation for pointing out the peccadillos of two renowned economists who obviously thought/think deeply about inflation. You’ll probably say accuracy is critical and what is true is true, but I think you perhaps overemphasised this a little too much. My guess is some of your motivation is that under an NGDP targeting framework, you’d also want people to be prepared for some makeup inflation, and this may be especially true if there is a real output drop due to perhaps another pandemic while nominal spending is kept on trend. In a case like this, the public needs to be ready for some transient inflation, albeit lower than what we got post COVID.
PS. The only way I’d even know enough to comment is that I’ve spent the last decade reading your books. So pardon a student who audited your class arguing with the professor.