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Not all spending is created equal. If you direct spending towards production it's much harder to have per-unit inflation since there are more goods available;

Not all spending is created equal. If you direct spending towards production it's much harder to have per-unit inflation since there are more goods available; instead, you get more total consumption. The classic "make the pie bigger." If you don't then yeah, you have more dollars chasing the same number of goods. So we need to be smarter overall in terms of how we look at allocation of money. It seems like the 2020 admin threw more money at the problem than was necessary, and did it in the second form, but it's probably still much better than having thrown too little at the problem would've been.

prottog 3y ago
> the 2020 admin threw more money at the problem than was necessary, and did it in the second form Yes, the Covid stimulus was an experiment in "helicopter money", with a predictable response in price, especially in light of concurrent supply-chain issues. > it's probably still much better than having thrown too little at the problem would've been No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come.
- majormajor 3y ago
  > No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come. Yes, some interventions leave things worse off than without. But with sudden massive unemployment and low savings, why do you think the default hypothesis is "nothing would be better"? You can have both "persistent lingering inflation for several years" AND "still better than the alternative."
  - prepend 3y ago
    I don’t think the argument is that nothing should have been done instead of what we did. The argument is that something better should have been done. There are many alternatives and we did one. It’s not like the only options were to drop trillions in cash on people or to do nothing.
WalterBright 3y ago
Government spending on production is usually mis-allocation, because if it was productive a private company would be already doing it. If it's a subsidy to a private company doing it, it isn't productive, either.
- majormajor 3y ago
  > Government spending on production is usually mis-allocation, because if it was productive a private company would be already doing it. This is learning the wrong lesson from broken windows / TANSTAAFLing yourself into thinking "all spending has the same ROI and it's never positive." Private companies will only do things that accrue economic gains to themselves instead of returning those economic gains across the population as a whole.
  - WalterBright 3y ago
    I didn't say "all" I said "usually". Making up things and then arguing against them is the strawman logical fallacy.
    - majormajor 3y ago
      I interpreted your "This extra spending is paid for with inflation." perhaps more generally than you meant it, then. "Any extra spending would've led to inflation" vs "that specific extra spending led to inflation" - I read you as more the former, not the latter. Re: "usually" I'm not sure if I disagree with it because I don't know what you mean. "Usually" in practice or "usually" in possibility? By dollar share or by project share or other? And how directly are we measuring ROI, especially in terms of infrastructure or technology development from large projects? I believe we could certainly get to a point where most government spending was net beneficial without needing to shrink the services provided by the government. EDIT: and if we're picking on logical errors instead of getting into more details: my claim was that other forms of spending could avoid inflationary problems. I don't see your response that this would usually be mis-allocation or unproductive saying anything directly about my claim.

prottog 3y ago

> the 2020 admin threw more money at the problem than was necessary, and did it in the second form Yes, the Covid stimulus was an experiment in "helicopter money", with a predictable response in price, especially in light of concurrent supply-chain issues. > it's probably still much better than having thrown too little at the problem would've been No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come.

majormajor 3y ago
> No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come. Yes, some interventions leave things worse off than without. But with sudden massive unemployment and low savings, why do you think the default hypothesis is "nothing would be better"? You can have both "persistent lingering inflation for several years" AND "still better than the alternative."
- prepend 3y ago
  I don’t think the argument is that nothing should have been done instead of what we did. The argument is that something better should have been done. There are many alternatives and we did one. It’s not like the only options were to drop trillions in cash on people or to do nothing.

WalterBright 3y ago

Government spending on production is usually mis-allocation, because if it was productive a private company would be already doing it. If it's a subsidy to a private company doing it, it isn't productive, either.

majormajor 3y ago
> Government spending on production is usually mis-allocation, because if it was productive a private company would be already doing it. This is learning the wrong lesson from broken windows / TANSTAAFLing yourself into thinking "all spending has the same ROI and it's never positive." Private companies will only do things that accrue economic gains to themselves instead of returning those economic gains across the population as a whole.
- WalterBright 3y ago
  I didn't say "all" I said "usually". Making up things and then arguing against them is the strawman logical fallacy.
  - majormajor 3y ago
    I interpreted your "This extra spending is paid for with inflation." perhaps more generally than you meant it, then. "Any extra spending would've led to inflation" vs "that specific extra spending led to inflation" - I read you as more the former, not the latter. Re: "usually" I'm not sure if I disagree with it because I don't know what you mean. "Usually" in practice or "usually" in possibility? By dollar share or by project share or other? And how directly are we measuring ROI, especially in terms of infrastructure or technology development from large projects? I believe we could certainly get to a point where most government spending was net beneficial without needing to shrink the services provided by the government. EDIT: and if we're picking on logical errors instead of getting into more details: my claim was that other forms of spending could avoid inflationary problems. I don't see your response that this would usually be mis-allocation or unproductive saying anything directly about my claim.