6 ms·

Well, if the demand for money is increasing and the supply is stable, then the value increases. Definition of supply and demand.

• nlfwhulsdhouv 7y ago
  Interestingly, you're doing exactly what the article is criticizing. The orthodoxy of "everything is supply and demand" has failed to predict many recent, important macroeconomic phenomenon. On the hand, the heterodox economists that draw from a variety of traditions and ideologies have had a reasonable success rate with predicting some of these important events; yet they are still treated as crackpots. The reality is orthodox economics is just one theory of politics and the organization of society, which sometimes applies and sometimes doesn't. Treating everything as just "[the] definition of supply and demand" forgoes observing interesting and important phenomenon that seemingly work in opposition to or independent of supply and demand. Ignoring these phenomenon restricts your ability to understand and predict macroeconomic effects, and degrades your legitimacy as a 'science'.
  • throw0101a 7y ago
    > The orthodoxy of "everything is supply and demand" has failed to predict many recent, important macroeconomic phenomenon. Can you give some examples of these many unpredicted phenomenon?
    • nlfwhulsdhouv 7y ago
      Here I found a good article about it: https://www.nybooks.com/articles/2019/12/05/against-economics/ https://www.nybooks.com/articles/2019/12/05/against-economic...
      • throw0101a 7y ago
        I've been reading Krugman and DeLong for the last ten years, and they've been calling things pretty accurately in that time, so I have no idea what the author is smoking.
        • specialist 7y ago
          Krugman's recent mea culpa about globalization is a nice example of intellectual honesty. I like to read the critics, contrarians. Including some I deeply respect but strongly disagree with, like Tyler Cowen. Keeps me sharp, honest. With myself. Hopefully.
  • wahern 7y ago
    The laws of supply and demand apply to everything, period. But they can only be predicative if you know the correct numbers. And because they do apply to everything, perfect accuracy and precision would require measurements that we don't know how to make or could make, as well as measurements for stuff we don't even know about. In applied economics people necessarily make simplifications, like assuming nominal prices in currency accurately reflect the various considerations consumers and producers have in mind. Suffice it to say, even tiny errors can easily and quickly produce bogus assessments and predictions. The proper criticism to basic economic laws isn't that they don't control, it's that we systematically underestimate (another measurement error!) our capability of applying them well, both ex post as well as and especially a priori. The same problem exists in all fields, it's just that many problems are relatively more tractable; solutions may not diverge as quickly, are more tolerant of inaccuracy and imprecision, generally producing more useful results. But at some point your numbers are sufficiently off that your predictions and models produce results widely at odds with reality. Such as all the various crazy and contradictory hypotheses regarding cosmological phenomena; hypotheses which turn on tiny uncertainties regarding various parameters. But in economics there are fewer constants and a heck of a lot more free variables for even simple predictions. It's quite literally intractable. That's why people often conceptualize "the market" as a giant calculator. We know the basic principles to the calculator, but at scale nobody can arrive at the solution faster than the giant calculator itself. Anyone telling you they can do so is necessarily lying to you. But in general the only people telling you that are politicians, pundits, and other people with an agenda, though sadly too many of them are also economists.
• aaronbwebber 7y ago
  No, the value does not increase. The price increases. Price and value are different in economic contexts, and you quite clearly were referring to "value" as economic value in your first comment, and are now using "value" to refer to price.
• dredmorbius 7y ago
  When we're talking about prices of goods, an increase in demand increases the monetary price of the goods. Price itself is a ratio, as William Stanley Jevons noted, of currency per unit of good. When we're talking about demand for money, an increase in demand for money means that it is valued more highly than goods or services. The price of money in this context, is ... goods and services. That is, a higher demand for money means a (comparatively) lower demand for goods and services. Which is to say, a propensity to offer a smaller amount of money for a given unit of goods and services. An increased demand for money === a decrease in nominal prices. By supply/demand logic.
  • wahern 7y ago
    Depends on what the price is denominated in. I initially read "price" as price in foreign currency, which would increase. Actually, that works for anything, like bananas--you'd pay more bananas for the same amount of that paper currency, thus the price in bananas increases.