2023 (20), №4

Revisiting Inflation Concepts: Orthodox Modifications and Heterodox Alternatives

For citation: 

Plushchevskaya, Y. L., & Smirnov, A. N. (2023). Revisiting Inflation Concepts: Orthodox Modifications and Heterodox Alternatives. AlterEconomics, 20(4), 751–776. https://doi.org/10.31063/AlterEconomics/2023.20-4.2


Amid rising global inflation, traditional monetary policies face challenges, prompting a reevaluation of their theoretical foundations and a surge in interest in alternative perspectives. This article examines recent alterations to conventional inflation concepts, questioning the extent of their significance and exploring the potential of heterodox theories as viable contenders. A literature review highlights that within mainstream economics, emphasis has been on the vitality of the Phillips curve, its accurate specification, and broader adjustments to analytical and forecasting frameworks. While models and techniques have grown more sophisticated, the core idea of inflation as a temporary deviation from long-run equilibrium due to exogenous demand shocks remains unchanged. In contrast, heterodox schools present fundamentally different approaches. Post Keynesianism attributes inflation to supply-side factors and distributional conflicts between workers and firms, with institutional features playing a significant role. Latin-American structuralism emphasizes imbalances in peripheral economies. Both theories develop mathematical models that incorporate production and institutional factors, allowing for a wide range of country-specific inflation trajectories. However, they seem to miss universal regularities to some extent. Evolutionary economics and the long-waves theory conceptualize price dyna­mics as manifestations of non-linear self-organization within a complex economic system, borrowing me­thods from the natural sciences. However, despite its obvious potential, this approach is still in the early phases of development. In summary, heterodox schools are in the process of formulating coherent inflation theories that could potentially replace the mainstream paradigm. If they can achieve theoretical and methodological compatibility, these schools may complement each other, providing a more robust foundation for understanding inflation dynamics.

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Yulia L. Plushchevskaya — Cand. Sci. (Econ.), Leading Research Associate, Institute of Economics of the Russian Academy of Sciences; https://orcid.org/0009-0008-2073-8017 (32, Nakhimovsky Prospect, Moscow, 117218, Russian Federation; e-mail: pul@inecon.ru).

Artem N. Smirnov — Senior Analyst, Digital Industrial Platform (6, Vernadsky prospect, Moscow, 119334, Russian Federation; e-mail: ansmirnov@nes.ru).

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