Abstract:
We offer a critique of a paper recently published Lorenzoni and Werning (2023) that seeks to make a) an original contribution to the hypothesis that inflation is primarily caused by conflict, and b) reconcile the Post-Keynesian and New-Keynesian traditions. In the first section, the authors develop a barter model that allows them to prove that inflation can occur when conflict exists even if there is no money. In the second section, they incorporate the conflict hypothesis into a broader framework compatible with New Keynesian models. We question the logical consistency and empirical validity of the barter model and the testability of the proposed framework. We also highlight the ideological roots of the "inflation is conflict" hypothesis and the policy implications that must be logically derived from it.