No term in the “dismal science” of economics is more misunderstood than “inflation.” The word means “rising prices,” but is used at different times by different people to describe totally different phenomena.
The most predominant type of inflation is natural and occurs as raw materials are used up and must be replenished. It's akin to the law of diminishing returns, or entropy, and is overcome by technological innovation. Another type of inflation is expressed through constantly changing conditions of supply and demand, including the fluctuating cost of labor. Yet another type results from the predatory pricing practices of monopolies such as the worldwide oil cartel which has jacked up the cost of petroleum to over $80 a barrel.
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