Friedman and Italian Quantity Theorists on Inflation: A Comparison

In the first part of the last century, some Italian economists, like Einaudi and Bresciani-Turroni, explained post-WWI inflation and hyperinflation using the quantity theory. As Friedman, they trace inflation to excessive money supply to cover public deficits. However, their explanation of the origins and effects of inflation differs in some key respects from that of Friedman. While Friedman refers to aggregate variables, the Italian quantity theorists, as Condorcet, acknowledge that, during inflation, goods and services prices rise at different rates. Inflation, therefore, has redistributive effects both with respect to wealth and income. Friedman and the Italian quantity theorists reach also different conclusions on the distorting effects of inflation: For Friedman these distortions end with the adjustment of expectations, for the latter inflation distorts the structure of the economy and these distortions can only be reabsorbed in the medium-long run. Notwithstanding these differences, both Friedman and the Italian quantity theorists share the idea that prerequisite for disinflation is reabsorption of government budget imbalances and that it is necessary to prevent disinflation from degenerating into deflation.