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The Cantillon effect is a desirable result in theory because it can greatly increases the viscosity of the resultant inflation. This gives the economy time to a
by jandrewrogers 4y ago
The Cantillon effect is a desirable result in theory because it can greatly increases the viscosity of the resultant inflation. This gives the economy time to adapt to the change in prices. Depositing newly created money directly into people’s accounts has the same base problem as the current situation — it is misallocated with respect to the need for expanding currency supply — but has the added problem that inflating the currency this way has very low viscosity, which is undesirable. Very liquid inflation is correlated with poor outcomes historically.
Any practical allocation of new currency is going to be a misallocation, including a helicopter drop. The challenge governments have is inflating currency in a way such that it takes as long as possible to be fully reflected in the economy so that it is minimally disruptive. This turns out to be very tricky, precisely because it is virtually guaranteed to be a misallocation.
- logicchains 4y ago>The Cantillon effect is a desirable result in theory because it can greatly increases the viscosity of the resultant inflation Whether it's desirable in theory depends on what the end goal is. If the end goal is less wealth inequality, a less efficient but more fair system might be more desirable than a more efficient one that systematically transfers wealth from currency holders to financial institutions.
- imtringued 4y agoInequality is actually highly inefficient because inequality allocates production away from the poor who have human basic needs and toward the rich who basically only have superfluous consumption left. You can't argue that these rich people invest in better things than feeding children or educating them.
- Dracophoenix 4y agoWouldn't investment in automation solve that?