While decomposing inflation into its constituent parts is empirically tricky, its essence is simple. Inflation results from too much money chasing too few goods. Milton Friedman popularised this rule of thumb. Its combination of intelligibility and explanatory power explains why it’s still widely used.

But not everyone got the memo. Politicians, bureaucrats, journalists and Very Online™ academics are looking hard for other causes. Let’s consider some bad explanations for inflation.

“Greedy corporations!”

The favourite of progressives in Congress, especially Senator Elizabeth Warren, this explanation is the worst of the lot. Corporations are always greedy. They want profits to be as large as possible. Yet inflation is rarely as high as it is now. The last time we saw the dollar depreciate this quickly was 40 years ago. You cannot explain a variable effect by a constant cause. Gravity does not cause one to trip and fall. Greed does not cause inflation.

“Market power!”

In economics, ‘market power’ means the ability of firms to charge prices in excess of marginal costs. Proponents of market-power explanations for inflation point to increased concentration in several industries over the past two years. 

Assume for the sake of argument that industry concentration has increased. It still doesn’t explain inflation. 

First, the link between concentration and market power is weak. Sometimes concentration is driven by structural economic factors – an efficient response to changing economic circumstances. When that happens, there’s no corresponding market-power increase.