Renowned Nobel Prize-winning economist Paul Krugman stirred a debate when he declared the end of the war on inflation in a recent post on Twitter/X. Krugman’s claim has sparked controversy, with other economists and experts arguing that the situation might be more complex than he suggests.
Krugman, currently the Distinguished Professor of Economics at the Graduate Center of the City University of New York, is a columnist for The New York Times. In 2008, Krugman was awarded the Nobel Memorial Prize in Economic Sciences, recognizing his work explaining international trade patterns and economic operations’ geographical dispersion. He examined the impacts of economies of scale and of consumer preferences for diverse goods and services.
Krugman was previously a professor of economics at MIT and at Princeton University, where he holds the title of professor emeritus.
Krugman’s social media post highlighted a declining inflation rate when excluding food, energy, shelter, and used cars from the Consumer Price Index (CPI). However, critics quickly pointed out that these components represent a significant portion of day-to-day living expenses for most people. By his exclusion, it is an incomplete picture of the true impact of inflation on American households.
Food prices, for one, were 4.3 percent higher in August compared to the same period a year ago.
According to the Labor Department, consumer inflation had increased by 3.7 percent over the past 12 months. This is significantly higher than the Federal Reserve’s target of 2 percent, although the rate has decreased from a peak of 9.1 percent in June 2022. And, Federal Reserve officials have warned that inflation could again increase. In fact, the three-month core inflation rate rose to 3.1 percent in September from 2.4 percent the previous month, MarketWatch reported. This most likely indicates that inflation may not be under control, as Krugman suggests.
After pushback, Krugman appeared to walk back his claim in a subsequent tweet, The New York Post reported. He wrote, “I was too flip here. I’ve been using this particular measure for a while, so want to be consistent. But it has flaws (medical insurance too optimistic). But almost every measure now <3 percent. 1/.”
Paul Krugman (Photo via Great Minds, https://www.thegreatminds.com/speaker/paul-krugman)