Every time prices move, economists conduct the same debate about why. The post-2021 inflation surge — US headline CPI peaking at 9.1% in June 2022, the highest in forty years — produced the latest round. Monetarists (in the lineage of Friedman 1963, inflation is always and everywhere a monetary phenomenon) blamed pandemic-era money-supply growth. Keynesians (Krugman, Summers 2021) blamed pandemic stimulus pushing demand against constrained supply. Modern Monetary Theorists (Kelton, Mosler) argued the binding constraint was real resources, not money. Supply-shock analysts (Blanchard, IMF) emphasized COVID supply chains and the Russia-Ukraine war. No school anticipated the magnitude or duration in advance, and none has fully convinced the others in retrospect.
Five contested frameworks govern modern macroeconomic disagreement. (1) Monetarist (Friedman & Schwartz, A Monetary History of the United States, 1963): inflation is fundamentally a money-supply phenomenon; expectations adjust; long-run money growth determines long-run inflation. Explained 1970s stagflation cleanly; less successful at explaining the 2008–2020 disinflation despite massive QE. (2) New Keynesian (Mankiw, Galí, Woodford): aggregate demand and supply jointly determine prices; the central bank manages demand via interest rates; sticky prices give monetary policy real short-run effects. The workhorse model in actual central banks. (3) Austrian (Mises, Hayek, modern revivals): inflation is malinvestment induced by artificially-low interest rates; central-bank manipulation distorts the structure of production. Influential among hard-money proponents and parts of the crypto community; conventional academia treats it sceptically. (4) Modern Monetary Theory (Kelton, Mosler): a sovereign currency-issuer cannot involuntarily default in its own currency; the constraint on government spending is real resources and inflation, not bond-market financing. Influential in some progressive policy circles; treated cautiously by orthodox economists. (5) Real Business Cycle (Kydland & Prescott, 2004 Nobel): emphasizes supply-side explanations for fluctuations; treats monetary policy as relatively passive. Performs better on supply-shock episodes than demand episodes.
The honest retrospective on 2021–2023: every school got significant features wrong. Monetarists overpredicted inflation in 2008–2020 (broad money rose; inflation didn't). Keynesians underpredicted inflation in 2021–2022. MMT underpredicted the political response (central banks raised rates aggressively despite MMT-flavoured arguments that supply-side explanations meant tightening was the wrong tool). Real central banks operate using forecasting models that mix New Keynesian theory with heavy judgemental adjustment. The polymath position: one school is probably more right than the others in any specific episode, but identifying which ex ante is hard, and the discipline has not converged. Anyone who tells you with confidence what causes inflation in general is selling something.