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It is a splendid question. A helpful concept might be "the velocity of money". The crucial insight is that all the money spent in an economy in one year can be

by FabHK 6y ago

It is a splendid question. A helpful concept might be "the velocity of money". The crucial insight is that all the money spent in an economy in one year can be expressed in two ways: Take the available quantity of money M, and assume that each dollar is used in to buy something V times per year. Then M x V is the total amount spent in a year. That must equal the gross national income, in nominal terms (ie in $ terms), namely P x Q (price level times quantity of goods produced). Thus: MV = PQ. (As a side note, I personally would definitely not look to Foucault for economic insight.)

sova 6y ago
MV=PQ suggests that money-supply and price-level could increase in tandem, and V and Quantity-of-goods-produced could be unchanging. However, it seems that there is more subtlety to this equation, a threshold on how much Q can deviate before P must deviate. It's an interesting equation in that it seems to be the "homeostasis" for monetary supply, but the balancing act itself is quite unclear. Do you have any suggestions on where to learn more about how this equation self-rectifies? Also, if not Foucault, who would you recommend for "economic insight?" Foucault's chapters on "Exchange" in "The Order of Things" are quite insightful, and if you read them and have any particular criticisms or disagreements I would much enjoy reading them.
- dragonwriter 6y ago
  > MV=PQ suggests that money-supply and price-level could increase in tandem, and V and Quantity-of-goods-produced could be unchanging. That’s mostly true, especially near full[0] employment. [0] not 100%, and how much less that is depends on other structural factors. If, say, uncontrolled social violence has people cowering in their homes instead of working the government printing money and offering to spend it on goods isn’t going to draw people out of their bunkers, its just going to drive up prices in the part of the monet economy still working.

by FabHK 6y ago

sova 6y ago

MV=PQ suggests that money-supply and price-level could increase in tandem, and V and Quantity-of-goods-produced could be unchanging. However, it seems that there is more subtlety to this equation, a threshold on how much Q can deviate before P must deviate. It's an interesting equation in that it seems to be the "homeostasis" for monetary supply, but the balancing act itself is quite unclear. Do you have any suggestions on where to learn more about how this equation self-rectifies? Also, if not Foucault, who would you recommend for "economic insight?" Foucault's chapters on "Exchange" in "The Order of Things" are quite insightful, and if you read them and have any particular criticisms or disagreements I would much enjoy reading them.

dragonwriter 6y ago
> MV=PQ suggests that money-supply and price-level could increase in tandem, and V and Quantity-of-goods-produced could be unchanging. That’s mostly true, especially near full[0] employment. [0] not 100%, and how much less that is depends on other structural factors. If, say, uncontrolled social violence has people cowering in their homes instead of working the government printing money and offering to spend it on goods isn’t going to draw people out of their bunkers, its just going to drive up prices in the part of the monet economy still working.