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>But the government also did take the finances under control, restructured (literal "changed the structure of", not defaulted) its debits, added controls to the

>But the government also did take the finances under control, restructured (literal "changed the structure of", not defaulted) its debits, added controls to the banking system, restructured the banks, pegged the currency to the dollar, made a campaign of price transparency, and a lot of other things. And how much of what you just listed worked the exact same way as the new currency trick, through being a frame to influence public perception? Thats the important perspective i took away from it, that i was thinking about economics wrong. In the end the way it works is through crafting stories to get the market participants to believe certain things. Because that is all the economy is, people and their behavior. And if you want to influence behavior, you have to influence how people think.

marcosdumay 4y ago
The educative campaign was also about people's mind. The others were very real changes and most people didn't even know they were happening. If you go into your sibling that continued my list, all of his items are real, and only the balanced budget was even communicated broadly. Yes, psychological factors are important for an economy, but they aren't singularly important. They are not even merely more important than the other kinds.
- cf141q5325 4y ago
  First off, thanks for your patience >They are not even merely more important than the other kinds. I might be very wrong here, but i dont think it is possible to source that. I understand that they did all those things, but unless its possible to articulate how it affected market participants behavior i would argue claiming causality is very difficult. How exactly does for example a balanced budget halt inflation outside of changing inflation expectation? There will be answers depending on which model you adhere to, but does that explanation still hold up and remain applicable today? Because if not you kind if have to explain why not. With economics being focused on human behavior in a market, what fundamentally determines how good a model describes the economy is market participants believe that it does. Because their believe determines the behavior you are trying to model in the first place. For that not to be the case we would need to see some static structures emerging in markets independent of market participants motivation and their understanding of how the market works. And if i am not mistaken that hasnt been the case. All there is is peoples behavior and it doesnt seem to be static. *There is of course stuff like interest rates which changes behavior directly through higher costs(forcing behavior instead of changing motivation), but as i said, most. edit: Which again, is the change in perspective i mentioned above. Unless i am overlooking something obvious, economic models arent describing some intrinsic behavior of markets because there doesnt seem to be any. They are only able to describe behavior once market participants behave that way. Which would mean economic models work because people believe they do. For that not to be the case you would need to see some models that remain applicable throughout time. I am sure i am overlooking something obvious, but the answer to that would be a link to a working economic model that identified some fundamental structures that isnt dependent on market participants motivation.
  - marcosdumay 4y ago
    There were plenty of policies against inflation that focus only on the people's perceptions in History. Those are an easy and cheap thing to try, so governments do try. When that's the only focus, those policies seem to fail every time. On the other hand, policies that focus on real aspects have a non-zero rate of success. A balanced budget by itself has a higher rate of success than any policy that doesn't include a balanced budget. Brazil was in an exceptional situation in 1994, where any policy based only on real aspects would be expected to fail. But don't think this is a general case.
    - cf141q5325 4y ago
      I am not arguing they dont work, quite the contrary, what i am focused on here is how they work. And that is always through changing the behavior of market participants. There is no other angle or lever to pull, that is all the economy is, peoples behavior. The distinction between tricking people with a fake currency and real policies like a balanced budget is meaningless in this context because they work the exact same way. Both give reasons for a reduction in Inflation expectation. You can argue that its justified (or real) in one case and not in the other but i dont see the point.

marcosdumay 4y ago

The educative campaign was also about people's mind. The others were very real changes and most people didn't even know they were happening. If you go into your sibling that continued my list, all of his items are real, and only the balanced budget was even communicated broadly. Yes, psychological factors are important for an economy, but they aren't singularly important. They are not even merely more important than the other kinds.

cf141q5325 4y ago
First off, thanks for your patience >They are not even merely more important than the other kinds. I might be very wrong here, but i dont think it is possible to source that. I understand that they did all those things, but unless its possible to articulate how it affected market participants behavior i would argue claiming causality is very difficult. How exactly does for example a balanced budget halt inflation outside of changing inflation expectation? There will be answers depending on which model you adhere to, but does that explanation still hold up and remain applicable today? Because if not you kind if have to explain why not. With economics being focused on human behavior in a market, what fundamentally determines how good a model describes the economy is market participants believe that it does. Because their believe determines the behavior you are trying to model in the first place. For that not to be the case we would need to see some static structures emerging in markets independent of market participants motivation and their understanding of how the market works. And if i am not mistaken that hasnt been the case. All there is is peoples behavior and it doesnt seem to be static. *There is of course stuff like interest rates which changes behavior directly through higher costs(forcing behavior instead of changing motivation), but as i said, most. edit: Which again, is the change in perspective i mentioned above. Unless i am overlooking something obvious, economic models arent describing some intrinsic behavior of markets because there doesnt seem to be any. They are only able to describe behavior once market participants behave that way. Which would mean economic models work because people believe they do. For that not to be the case you would need to see some models that remain applicable throughout time. I am sure i am overlooking something obvious, but the answer to that would be a link to a working economic model that identified some fundamental structures that isnt dependent on market participants motivation.
- marcosdumay 4y ago
  There were plenty of policies against inflation that focus only on the people's perceptions in History. Those are an easy and cheap thing to try, so governments do try. When that's the only focus, those policies seem to fail every time. On the other hand, policies that focus on real aspects have a non-zero rate of success. A balanced budget by itself has a higher rate of success than any policy that doesn't include a balanced budget. Brazil was in an exceptional situation in 1994, where any policy based only on real aspects would be expected to fail. But don't think this is a general case.
  - cf141q5325 4y ago
    I am not arguing they dont work, quite the contrary, what i am focused on here is how they work. And that is always through changing the behavior of market participants. There is no other angle or lever to pull, that is all the economy is, peoples behavior. The distinction between tricking people with a fake currency and real policies like a balanced budget is meaningless in this context because they work the exact same way. Both give reasons for a reduction in Inflation expectation. You can argue that its justified (or real) in one case and not in the other but i dont see the point.