Stuff costs more and we often get less of it. We all know this. But in a book titled Inflation: What It Is, Why It’s Bad — and How to Fix It, economists Steve Forbes, Nathan Lewis, and Elizabeth Ames argue that the social cost of inflation is also high.

The Spectator World adapted excerpts of a chapter in the book, which we in turn will excerpt.

The scenario is fairly standard: central banks devalue money; prices shoot up. Governments look for ways to tamp down inflation by keeping people from spending. They also respond with price controls, capital controls, higher taxes. Governments grow larger and often impose more constraints. People lose their freedom, and worse.

They recount damaging price controls imposed by Roman emperor Diocletian and U.S. President Richard Nixon, as well as the already rampant growth of regulations hampering the economy under the Biden administration. Eventually, this push leads to dependence.

But inflation’s most damaging effect may be its debasement of social behavior. Money, after all, is more than a measuring instrument. By providing a mutually-agreed-upon, stable unit of value, money facilitates trust between buyer and seller, lender and borrower. It helps people cooperate in a market economy based on expectations that promises will be fulfilled. Money I’m borrowing from you will be the same value as the money I will use to repay you ten years from now. Stable money promotes the market equivalent of the Golden Rule: do unto others as you would have them do unto you.

When money is no longer a trustworthy measure of value, these promises aren’t kept. Market behavior and relationships between people become warped and distorted. Agreements are voided. Creditors lose their shirts. Debtors gain unexpected windfalls. Real wages decline. Pensioners find their monthly payments are inadequate. People are taxed unfairly.

Worst of all, no one knows why all of this is happening. You’re not sure why prices are rising or why your money doesn’t go as far as it once did. Meanwhile, you see certain people reaping unfair windfalls. They’re getting rich not through honest work, but from distorted capital markets or government cronyism. Inflation, thus, foments a sense of unfairness and grievance. As John Maynard Keynes himself acknowledged: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.”

At all levels of inflation, there is an undermining of social trust. Political divisions are inflamed. Angered by the unfairness and inequality they see around them people search for scapegoats.

Historically, those scapegoats included Roman Christians, British witches, French aristocrats, and German Jews. All of those groups were massacred. Here in the U.S.?

Studies have shown that trust in American political institutions has plunged since the relatively stable money era of the 1990s. Politics has become more polarized than at any other time in recent memory. Street violence has erupted not only in the US but in nations around the world. Radical movements are flouting social norms and attacking the fundamental values and symbols of America’s system of democratic capitalism, including the Constitution and the Founding Fathers. Government has grown larger and more intrusive; political rhetoric darker and more pessimistic.

There is hope, but it’s going to take leadership like that of Ronald Reagan, who the authors rightly note “was one of a select group of leaders who successfully defeated a major inflation.”

Read the whole thing here.