The Cause of Inflation

What is the cause of inflation?

We have experienced inflation in the United States (and globally) for the last couple of years. And it is hard on people. So naturally, people frequently discuss the cause of inflation, often in hopes that we can stop inflation or decrease it.

I am especially interested in conversations about the cause of inflation because I am especially interested in how we determine causality in general. That is, I’m interested in how we logically determine when one thing causes another thing.

That may seem like a weird interest, but it may make more sense if I tell you about a reasoning error people often commit called false cause. Philosophers and logicians often refer to reasoning errors as logical fallacies.

False Cause

People commit the fallacy of false cause when they reason in this manner: Because A (any event) happened before B (another event), A caused B.[1]

For example, let’s imagine someone named Louie makes the following argument: “I drove my car over the Kentucky state line, and then my car broke down. So, the state of Kentucky made my car break down.”

Notice that the structure of this argument is as follows: Because A (I drove over the Kentucky state line) happened before B (my car broke down), A (driving into Kentucky) caused B (my car to break down).

When we view the structure of Louie’s argument, we can see a problem with it. Namely, we recognize that just because Louie’s car broke down when he drove over the Kentucky state line doesn’t necessarily mean that Kentucky (or driving into Kentucky) caused Louie’s car to break down. These two things aren’t necessarily connected, even though they happened close to one another chronologically.[2]

After all, it could be that Louie’s car had problems long before he entered Kentucky. And it could be that, coincidentally, these problems caused his car to break down just as he crossed the state line.

As another example, imagine that Sarah makes the following argument: “I ate pizza on Thursday night, and then I failed a philosophy quiz on Friday. Clearly, eating pizza caused me to fail my philosophy quiz.”

The structure of Sarah’s argument is as follows: Because A (eating pizza) happened before B (failing a philosophy quiz), A (eating pizza) caused B (failing a philosophy quiz).

When we view the structure of Sarah’s argument, we can see an obvious problem with it. Namely, we recognize that just because Sarah failed her philosophy quiz after she ate pizza doesn’t necessarily mean that pizza caused her failing grade. After all, there could be many other things, like not studying enough, that caused Sarah to fail her philosophy quiz. It could just be a coincidence that she ate pizza right before she failed the quiz.

Both Louie and Sarah have something in common: their arguments commit the logical fallacy of false cause. That is, they both argue that because one thing (A) happened before another thing (B), the first thing (A) caused the other thing (B).

Why It’s Easy to Commit the Fallacy of False Cause

On the one hand, it’s easy to understand why someone might reason this way. After all, causes do precede the events they cause.

For example, we know that certain weather conditions precede and cause snow.  Also, we know that certain financial conditions precede and cause bankruptcy. And we know that certain problems like a weakened immune system or high levels of stress often precede sickness.

So, it is absolutely right to note that the cause of things precedes them. However, when we commit the fallacy of false cause, we mistakenly assume that simply because something (A) happened before something else (B), it logically entails that A caused B.

On the other hand, a moment’s reflection will help us understand why this kind of reasoning is suspect.  Consider that for any event (B) that happens, hundreds, and even thousands, of things precede it. But certainly not all the preceding events are the cause of B.

For example, as I type this blog post, I feel sleepy. Hundreds of things happened before I became sleepy. For example . . .

This morning, I woke up a littler earlier than normal and felt rested.

And then a few hours later, I taught ethics.

Then I drank coffee and ate some soup.

And I talked to a colleague.

Then I went on a walk.

And then I came back to my office and sat in my favorite office chair.

Which one of these things caused my sleepiness? Did all of them cause it? Did any of them cause my sleepiness?

Correlation Does Not Equal Causation

These questions suggest that just because all the italicized items above occurred before I felt sleepy, it is not clear that any of them caused my sleepiness. The fact that some thing, or many things, happened before another thing does not logically entail that they are causally related in any way. When we assume that events correlated in time are necessarily causally related, we commit the fallacy of false cause.

But, of course, some things do, in fact, cause other things. So how can we figure when A actually does cause B? To figure this out, we need a logical and consistent methodology.

What Does This Have to Do with Inflation?

Now let me relate these ideas to the issue of inflation, which is what this post is about.

As I mentioned at the beginning of the post, we are currently suffering a period of inflation. Understandably, everyone wants to determine the cause of inflation so we can stop it. Frequently when inflation occurs, people argue that the president or political party in power caused inflation with their policies.

It’s understandable why people would argue this. After all, the president and ascendant political party have a lot of power and act in ways that dramatically affect the country. It is natural to believe such actions might affect the economy. And, in fact, their actions might be the cause of inflation.

And of course, if inflation has been low under one president or political party and then increases under another president or political party, it is natural to consider whether the two things are related.

False Cause in Thinking about the Cause of Inflation

On the other hand, if we automatically assume that a certain president or political party caused inflation simply because inflation occurred after they took office, we reason like Louie and Sarah in my argument examples above.

That is, we argue that merely because A (a president or political party took office) and then B (inflation) happened, A necessarily caused B.

Now it might be that a president or political party did, in fact, cause inflation. But we cannot assume this merely because inflation happened after a certain political party or president took office. After all, such reasoning would imply that if inflation decreased suddenly (as it often does during inflation periods), the president or political party in office also caused the inflation decrease. And it would be unreasonable, all things being equal, to assume that the same policies of the same president and same political party both increased and decreased inflation at the same time.

If we want to avoid the fallacy of false cause with the issue of inflation, there are at least three steps we could take to do this:

One: Remember that just because one event precedes another, it doesn’t mean that the first event caused the other. Correlation does not necessarily imply causation. Simply remembering this truth can help us avoid the fallacy of false cause.

Two: Use good logic to establish causality. One of the best ways to do this is to examine a variety of evidence that both potentially proves and disproves your hypothesis. For example, if Sarah wanted to figure out if eating pizza did, in fact, cause her to fail her philosophy quiz, she would want to examine a wide variety of instances to test this hypothesis. She would want to discover if there were multiple instances in which she ate pizza and then failed a quiz.

She would also want to examine instances in which she ate pizza and didn’t fail a quiz. Or she would want to examine instances in which she failed a quiz and pizza was not involved in any way. Certainly, one instance of eating pizza and failing a quiz doesn’t establish causation. So, it is only by examining a wide variety of instances that Sarah can determine if there is a causal connection between eating pizza and failing quizzes.

In the same way, people who sincerely desire to determine the cause of inflation should examine a wide variety of instances in which inflation increases or decreases, And they should examine various possible causal factors. They should also be willing to examine evidence that would disprove their hypothesis.

Three: Be willing to consider complex causality. Some things in life have one cause. For instance, broken windows usually have one cause: something hit the window. But many things in life, for instance an illness, have complex causality. For example, stress, lowered immunity, sleep deprivation, and nutrient deficiencies could all contribute to a person’s illness.

And in case you are wondering different possible causes of inflation, you might like article from Harvard Business Review which discusses the likely complex causality behind inflation: What Causes Inflation?

This is also a helpful article from the Stanford Review: What Causes Inflation? Stanford Scholar Explains.

And here is one more: Economists Point Fingers at Different Culprits.

In addition, this article examines the causes of falling inflation: Inflation Falls in December, Continuing Its Cooling Trend.

The articles above are helpful in exploring various possible causes of inflation (and the decrease in inflation as well). They are from reputable sources, and they also don’t all agree with one another. So, you are sure to feel your thinking challenged if you read through all them.

Did you know that I have written several books on logic and critical thinking? I love giving everyday folks like you and me the basic tools they need to think logically, confidently, and well. You can check out my books here: Books.

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[1] The fancy Latin name for false cause is post hoc ergo propter hoc. (Translation: Because this, therefore that.)

[2] There’s an old saying: “Correlation does not equal causation.” Just because two things are correlated in time or space (or some other way), does not necessarily mean one causes the other.