Politicians and central bankers, trying to pass the buck on four-decade highs in inflation, are increasingly blaming price gouging. “Greedflation” supposedly happens when big companies use their market power to chase profit margins. This idea has made prominent appearances in inflation analyses from President Biden, Sen. Elizabeth Warren, the European Central Bank, and Lael Brainard, a former Federal Reserve vice chair and current top economic advisor to President Biden.
Greedflation has several appealing qualities to policy makers. First, it appears to absolve them of blame. They will claim it wasn’t the trillions of government dollars pumped into an already recovering economy that drove inflation, nor the Fed’s later-than-Godot start to the tightening cycle; it was price gouging by those greedy corporations, or better yet, profiteering off the Russia-Ukraine war.
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Stephen Miran is an adjunct fellow at the Manhattan Institute, co-founder of asset manager Amberwave Partners, and a former senior adviser for economic policy at the U.S. Treasury, 2020–21.
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