Andrew Elrod in Phenomenal World:
Until 1980, the annual rate of change of the Consumer Price Index (CPI), the weighted measure of the cost of a basket of core consumer goods, increased at an accelerating pace in every business-cycle expansion, reaching double digits during the 1940s and 1970s. Inflation—its causes and consequences—was at the heart of economic debates throughout this period, when the discipline of macroeconomics took its current form. While we understand individual industry price changes in terms of supply, demand, and market power, our conceptual tools for understanding inflation remain weak. Neither monetarist attention to the “money supply” nor the institutionalist focus on the Phillips Curve have provided a reliable guide with which to construct macroeconomic policy: the relationship between the price level and the unemployment rate has attenuated with the decline of collective bargaining, and a more than eleven-fold increase in the sum of checking deposits, savings deposits, and cash on hand in the US since 1980 (the standard M2 measure of the money supply) has seen the annual increase in the CPI fall below four percent for all but a handful of the past forty years. Even the phenomenon implied by the term is the subject of confusion: Does it refer to the amount of money or debt in circulation, or to a rise in price and values? If the latter, which prices or values?