In the Summer 2009 issue of City Journal Theodore Dalrymple discusses the cultural effects of inflation:
asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness.
As a general rule, economists do not feel comfortable with cultural arguments. Often, this is not necessary because cultural arguments can be rephrased in technical language that economists do feel comfortable with. In the case of government-induced currency debasement, the effects of these policies can be evaluated from an economic point of view by studying how inflation alters the incentives and behavior of economic agents. If Dalrymple is correct, the behavioral micro-effects (or even “pico-effects”) of unpredictable changes in the value of money deserve a lot more attention from economists than has been given so far.
Ironically, the cultural effects of inflation have received little attention from empirically-minded progressive commentators but are increasingly discussed by conservative-leaning Austrian economists. For example, Jörg Guido Hülsmann writes:
The spiritual dimension of these inflation-induced habits seems to be obvious. Money and financial questions come to play an exaggerated role in the life of man. Inflation makes society materialistic. More and more people strive for money income at the expense of personal happiness. Inflation-induced geographical mobility artificially weakens family bonds and patriotic loyalty. Many of those who tend to be greedy, envious, and niggardly anyway fall prey to sin. Even those who are not so inclined by their natures will be exposed to temptations they would not otherwise have felt. And because the vagaries of the financial markets also provide a ready excuse for an excessively parsimonious use of one’s money, donations for charitable institutions will decline.
Similar observations can be made about Keynesian policies to stimulate “the economy.” With the exception of a handful of libertarian socialists, progressives do not appear to be bothered at all by economic doctrines that treat consumption for consumption’s sake as a remedy for economic ills.