Karen Palasek’s most recent Free Market Minute does an excellent job at describing the difference between an increase in the cost of something–a rising individual price–and inflation. There is no time period where this confusion was more prevalent than in the 1970s when it was argued that the cause of the double digit inflation problems that the country was experiencing was due to rising oil and gasoline prices. Of course, as Karen points out, this reasoning was simply ignorant. Rising prices cannot be both the result and the cause of inflation. In a growing economy inflation is caused by increases in the money supply.
As an aside, during most of the 1970s, from 1975 to1979, the price of gasoline and crude oil actually fell relative to inflation, making the claim that rising oil and gas prices were causing inflation doubly illogical.
