3 ms·
> All of these people who would otherwise have less/no money are now spending that printed money to purchase goods like food, thus driving inflation higher. Th
by jusssi 6y ago
> All of these people who would otherwise have less/no money are now spending that printed money to purchase goods like food, thus driving inflation higher.
This assumes those goods are a scarce resource, so that increased consumption eventually leads to shortage. I can't quote sources, but my understanding is that we have enough food to feed everyone ATM, and any remaining hunger is just a failure of the economy to solve the distribution of currency.
- climwe 6y agoMillions of potatoes were recently discarded by Idaho farms due to surplus and lack of demand. I would point to Yemen's hunger crisis, but there are people literally inside of Idaho who don't have food. If you can't even distribute excess food within your own borders it's no longer a logistics problem, people just don't care.
- zumachase 6y agoThese goods are scarce in the economic sense, even if you think they are “cheap”. They are not free to produce. We do have enough food to feed the world, but that would mean your food gets more expensive as other people consume what would otherwise contribute to downward supply pressure.
- climwe 6y agoIf there is excess food and it is given to people who would not otherwise buy food, there would be no negative effect on prices or the economy in general. Maybe examples of these types of people don't exist in America all that much but they certainly do in the rest of the world. Your argument only makes sense if the excess food is given to people who can afford it and just want to eat for free.
- zumachase 6y agoI’m sorry, that’s just not how economics works. A market with excess supply necessarily has lower prices than one that is balanced, ceteris paribus. Idaho potatoes were mentioned above. They are only being thrown away because the market does not want them. The mechanism by which this happens is price: prices drop low enough that it’s cheaper to throw away (we saw negative oil prices recently). One explanation is that other farmers saw this supply glut and raced to slash their prices. If we took all those excess potatoes and gave them away, then absent this excess supply, those other farmers would not have done this and prices would have remained steady or not gone down as much. Thus the artificial increase in quantity demanded is necessarily inflationary.
- Unsimplified 6y agoIncorrect. The use of discarded product by non-market flows has no effect on market price.
- zumachase 6y agoYou’re putting the cart before the horse: price came first, then the product was discarded. The risk that these potatoes might be dumped into the market pushed prices down. If you magically take this risk away, it doesn’t matter by which mechanism, that threat goes away and price responds. If I’m another potato farmer and all of a sudden all those extra potatoes are teleported somewhere else, I will in all likelihood raise my prices. Even the most progressive theorists would not debate this. It’s basic aggregate supply and demand.
- ianleeclark 6y ago> It’s basic aggregate supply and demand. Okay, so then we have absolutely no idea in which way the demand curve will curve then. If the demand curve can be any polynomial, then we have no clue if this will happen or not.
- zumachase 6y agoWhat? Nothing I said has anything to do with the demand curve. This is all supply side. We hold the demand curve constant for any such analysis. But it’s irrelevant anyway: a basic tenet of economics is that people are, in aggregate, utility maximizers. So yes, we do have an idea of some fundamental properties of the demand curve and it cannot simply be any polynomial.
- ianleeclark 6y ago> We hold the demand curve constant for any such analysis. And this is the portion that I'm critiquing. You're holding it as a constant curve sloping downwards. > So yes, we do have an idea of some fundamental properties of the demand curve Okay, sure, it relies on there being people who have demand for some commodity. > it cannot simply be any polynomial "Any polynomial" might be overselling it, but we can't assume it's sloping downwards.
- mlthoughts2018 6y agoIt’s not free to transport and distribute the product though. If the surplus has driven down price, the supplier may also be facing a lack of revenue that means any extra cost on transport is too much to bear, even if they really wish they could donate the discardable surplus. Additionally they may be able to count the discarded product in a business loss category that yields a better tax write-off or qualifies them for assistance in a way that straight donation doesn’t. To me your example feels like a Chesterton’s Fence scenario where government involvement is responsible for disincentivizing the common sense option of donating a surplus.
- kortilla 6y agoThe problem is that all consumption levels stay the same but the production costs surge because a bunch of people aren’t working to help produce supplies. The only way inflation doesn’t occur is if all of the unemployed people were doing useless things that nobody wanted in normal times, which is not how most of the worlds markets function.
- woah 6y agoHow many people do you need to grow potatoes?
- leetcrew 6y agoit's not just the distribution of currency; it's the distribution of food itself. a lot of food waste happens because the cost of transporting and storing it would result in a net loss.