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> Hard disagree. Inflation is affected by wages, but it's not a 1:1 relation I am talking about "real wages" to avoid the gotchas associated with nominal wage

> Hard disagree. Inflation is affected by wages, but it's not a 1:1 relation I am talking about "real wages" to avoid the gotchas associated with nominal wage and inflation definitions. I think this makes the controversy go away. When you extend the nominal wage growth beyond the productivity gains in real terms, any extra purchasing power from a nominal wage gain will have no real basis and thus instantly triggering inflation as defined for your specific personal definition by demographic and income. Say if you are really rich, your personal consumer basket that defines your personal purchasing power (and your personal inflation) will be dominated by expensive luxury items and investments while regular food/medical price increases will not impact you at all because they are a small part of the basket. However if your "demographic" (that has similar personal consumer basket) wage increases there is nothing to stop the price increase on such goods. There are small exceptions, but we can ignore them for the most part. When you break down the demographics into small enough micro-groups you can get rid of the guesswork about what is inflation and how it affects everybody on average. This way you should be able to see how the relationship between wages and inflation is really 1:1. It's indeed not 1:1 when you mix dissimilar baskets and work with averages.

ikeboy 7y ago
Now you're changing your claim. You're not talking about real wage increases, you're talking about an increase that's bigger than the productivity increase. Even that doesn't necessarily increase inflation 1:1. Your models are off. You can't talk about a single demographic because multiple demos buy the same products. The demand curves have multiple customers.
- vladimirralev 7y ago
  Real wage increase is the same as nominal wage, bigger than productivity increase. Real wages already have productivity and inflation factored in, so any extra nominal increase would be beyond productivity. > Even that doesn't necessarily increase inflation 1:1. Your models are off. Assuming you use the example rich demographic I gave, what would be an example scenario that systemically breaks the 1:1 ratio? > You can't talk about a single demographic because multiple demos buy the same products. I know what you mean here but you can bypass the dependencies between demos by letting the system play itself out and taking the numbers when you have access to them. You can pick any demographic or a person and you can get their personal basket, calculate inflation, calculate their purchasing power and how it changes every single tick just from their credit card statements. It doesn't matter what other people buy when you can see the actual purchases for each individual. What other demos buy is already taken into account in the numbers you see in the credit card statements so to speak.
  - ikeboy 7y ago
    >Real wages already have productivity and inflation factored in What source are you using that adjusts for productivity when reporting real wages? Real is defined as inflation adjusted only. >Assuming you use the example rich demographic I gave, what would be an example scenario that systemically breaks the 1:1 ratio? >Say if you are really rich, your personal consumer basket that defines your personal purchasing power (and your personal inflation) will be dominated by expensive luxury items and investments while regular food/medical price increases will not impact you at all because they are a small part of the basket. However if your "demographic" (that has similar personal consumer basket) wage increases there is nothing to stop the price increase on such goods. You're assuming perfectly inelastic supply, among other things. If there's elasticity, then additional money will result in some additional supply of luxury goods and greater quantity demanded. Also, investments != purchases. Investments are a decision to defer consumption to the future.

ikeboy 7y ago

Now you're changing your claim. You're not talking about real wage increases, you're talking about an increase that's bigger than the productivity increase. Even that doesn't necessarily increase inflation 1:1. Your models are off. You can't talk about a single demographic because multiple demos buy the same products. The demand curves have multiple customers.

vladimirralev 7y ago
Real wage increase is the same as nominal wage, bigger than productivity increase. Real wages already have productivity and inflation factored in, so any extra nominal increase would be beyond productivity. > Even that doesn't necessarily increase inflation 1:1. Your models are off. Assuming you use the example rich demographic I gave, what would be an example scenario that systemically breaks the 1:1 ratio? > You can't talk about a single demographic because multiple demos buy the same products. I know what you mean here but you can bypass the dependencies between demos by letting the system play itself out and taking the numbers when you have access to them. You can pick any demographic or a person and you can get their personal basket, calculate inflation, calculate their purchasing power and how it changes every single tick just from their credit card statements. It doesn't matter what other people buy when you can see the actual purchases for each individual. What other demos buy is already taken into account in the numbers you see in the credit card statements so to speak.
- ikeboy 7y ago
  >Real wages already have productivity and inflation factored in What source are you using that adjusts for productivity when reporting real wages? Real is defined as inflation adjusted only. >Assuming you use the example rich demographic I gave, what would be an example scenario that systemically breaks the 1:1 ratio? >Say if you are really rich, your personal consumer basket that defines your personal purchasing power (and your personal inflation) will be dominated by expensive luxury items and investments while regular food/medical price increases will not impact you at all because they are a small part of the basket. However if your "demographic" (that has similar personal consumer basket) wage increases there is nothing to stop the price increase on such goods. You're assuming perfectly inelastic supply, among other things. If there's elasticity, then additional money will result in some additional supply of luxury goods and greater quantity demanded. Also, investments != purchases. Investments are a decision to defer consumption to the future.