Thread by @R2Rsquared

Start from the classical model in micro 101, the foundation of modern econ. A fundamental result (going back centuries) is that inflation is indeterminate. That means that if people expect inflation of 100%, inflation will be (close to) 100%. Why?
doi.org/10.2307/3440167

If everyone expects prices to double, everyone sets their [prices / wages / any choice in £s] to be twice as high. But then prices double, just as people expected. Expectations are (almost) *all* that matters for inflation, and they can be anything.
doi.org/10.1086/696050

In classical models, indeterminacy is broken by a monetary-fiscal policy regime. Monetarism, interest rates, FTPL, etc, are different approaches to use a policy variable to steer expectations of that variable and of inflation, to pin inflation itself.
bit.ly/2Y9yuYs

Models of stickiness [transaction costs, nominal rigidities, information, etc] are models to have real outcomes and inflation determined simultaneously. They produce a “Phillips curve”: now, for fixed expectations, real activity *also* pins down inflation.
ideas.repec.org/h/eee/monchp/3…

Sections 3 and 4 of this paper criticize some features of (very old) models of the Phillips curve. There is much to discuss about those features, but if you take them away…
...you are back at the classical point where *all* that matters is expectations
doi.org/10.17016/FEDS.…

A looong time ago, macro did not have to be grounded on classical micro principles. But even then, the major authors thought expectations were *crucial* for inflation: see Keynesian “animal spirits” or Samuelson-Solow’s classic article (page 83 here)
ideas.repec.org/a/aea/jecper/v…

Incidentally, even a policymaker like McChesney Martin (Fed chair 1951-70), who used little formal theory to guide his actions, *very often* discussed inflation expectations as a main driver of the rise in inflation in the 1960s (see pages 4-9 here)
brook.gs/3uBuexd

So, when Rudd discusses economic theory to argue that expectations do not matter for inflation, imho he has little to stand on: definitely not in the core of micro-founded macro, and not even in pre-1970s macro. Theory soundly says *yes*, expectations matter for inflation.