3 ms·

Inflation is when the number of dollars increases faster (or decreases slower) than the amount of value in the (USD) economy does. If the money is invested in a

Inflation is when the number of dollars increases faster (or decreases slower) than the amount of value in the (USD) economy does. If the money is invested in a way that creates over a dollar's worth of value per dollar, printing money can actually reduce inflation. In typical circumstances, such investment possibilities do not exist. However, in disasters (e.g. a 4-year-old virtuoso needs surgery to repair a ventricular septal defect; an average person is homeless and needs a place to live; an asteroid's on a collision course with the planet), creating additional money is often the correct decision. Experts disagree whether the recent pandemic was such an opportunity and – if so – what the correct response was: we saw lots of different strategies playing out in lots of different countries, but I don't think that's helped resolve the controversy.

AnthonyMouse 3y ago
You're combining two different things. If you print a dollar and use it to improve productivity by more than a dollar, this might not cause inflation, but the same is true of raising general taxes by a dollar and using it for the same purpose. And those purposes are scarce, because by definition they have to have above-average productivity. If you have one then it makes sense to fund it regardless of whether the money comes from printing or taxes, and the inflationary/deflationary consequences of that spending being priced in. And then we're back to the amount of printing being set by the desired amount of inflation, and any incremental spending on top of that coming from taxpayers.
- wizzwizz4 3y ago
  > but the same is true of raising general taxes by a dollar No, because taxes pull resources out from specific, easily-measurable areas of the economy, and that has effects on people's motivation. Increasing the value of the dollar applies deflationary pressure. High taxes on economic activity, combined with deflation, is not a good combination: people will stop spending money, and while that does relieve more opportunities for the government to invest in the economy… the competence of governments tends to be concentrated in a few specific areas, and things tend to go wrong when an unprepared government tries to run an entire economy directly. > And those purposes are scarce, Assuming the Efficient Market Hypothesis applies, yes. In practice… no, they really aren't. The average person contributes more to the economy than they are paid (a corollary of the theory of mutually-beneficial trade), housing costs less than ¾ of the average person's income, and people are a lot less effective at producing economic value when they have poor living conditions. The only way it would make economic sense to leave people living on the street, or constantly in and out of hotels, is if we assume the currently-homeless are inherently inferior at economic activity. Every UBI study ever has yielded evidence contrary to this assumption… and yet, we still have homeless people and we aren't doing large-scale UBI, because… reasons. (Note that I'm ignoring the moral, human rights argument. I actually care more about human rights than numbers-go-up: it's possible that my bleeding heart is interfering with my cold, hard rationality, letting me overlook some logical flaw in this explanation.) > If you have one then it makes sense to fund it regardless of whether the money comes from printing or taxes, Yes! But humans are not ideal rational economic actors, and groups of humans are even worse. There is so much low-hanging fruit, you don't even need to get into the controversial things (like how exactly to fix / avert a recession) to take advantage of them. We've got years-long waiting lists for chronic health conditions that can be solved by a single drug, or a three-hour surgery. Public transport is eschewed in favour of just increasing the width of roads, leaving people shackled to slow, expensive-to-maintain, time-consuming-to-drive private cars for their travel needs. I have never seen an economic argument that supports the status quo: only political ones. For some reason, there's usually political will to reduce taxes. (There's currently a European Citizens' Initiative to increase taxes,[0] which has reached the required threshold in France and half the required threshold in Belgium,[1] making it the most popular Citizens' Initiative currently running,[2] but politicians tend to get elected by promising tax cuts.) There's also political will to keep inflation in check. There is rarely, if ever, political will to reduce the numerical quantity of money in circulation (except as it impacts inflation), so I predict that's where many of the resources will come from, if one of the currency-controlling governments (UK, US, EU, Sweden, etc) figures out how to fix some of these problems. [0]: https://feps-europe.eu/news/tax-the-rich-a-european-citizens-initiative/ https://feps-europe.eu/news/tax-the-rich-a-european-citizens... [1]: https://citizens-initiative.europa.eu/initiatives/details/2023/000006_en https://citizens-initiative.europa.eu/initiatives/details/20... [2]: https://citizens-initiative.europa.eu/_en https://citizens-initiative.europa.eu/_en

AnthonyMouse 3y ago

You're combining two different things. If you print a dollar and use it to improve productivity by more than a dollar, this might not cause inflation, but the same is true of raising general taxes by a dollar and using it for the same purpose. And those purposes are scarce, because by definition they have to have above-average productivity. If you have one then it makes sense to fund it regardless of whether the money comes from printing or taxes, and the inflationary/deflationary consequences of that spending being priced in. And then we're back to the amount of printing being set by the desired amount of inflation, and any incremental spending on top of that coming from taxpayers.

wizzwizz4 3y ago
> but the same is true of raising general taxes by a dollar No, because taxes pull resources out from specific, easily-measurable areas of the economy, and that has effects on people's motivation. Increasing the value of the dollar applies deflationary pressure. High taxes on economic activity, combined with deflation, is not a good combination: people will stop spending money, and while that does relieve more opportunities for the government to invest in the economy… the competence of governments tends to be concentrated in a few specific areas, and things tend to go wrong when an unprepared government tries to run an entire economy directly. > And those purposes are scarce, Assuming the Efficient Market Hypothesis applies, yes. In practice… no, they really aren't. The average person contributes more to the economy than they are paid (a corollary of the theory of mutually-beneficial trade), housing costs less than ¾ of the average person's income, and people are a lot less effective at producing economic value when they have poor living conditions. The only way it would make economic sense to leave people living on the street, or constantly in and out of hotels, is if we assume the currently-homeless are inherently inferior at economic activity. Every UBI study ever has yielded evidence contrary to this assumption… and yet, we still have homeless people and we aren't doing large-scale UBI, because… reasons. (Note that I'm ignoring the moral, human rights argument. I actually care more about human rights than numbers-go-up: it's possible that my bleeding heart is interfering with my cold, hard rationality, letting me overlook some logical flaw in this explanation.) > If you have one then it makes sense to fund it regardless of whether the money comes from printing or taxes, Yes! But humans are not ideal rational economic actors, and groups of humans are even worse. There is so much low-hanging fruit, you don't even need to get into the controversial things (like how exactly to fix / avert a recession) to take advantage of them. We've got years-long waiting lists for chronic health conditions that can be solved by a single drug, or a three-hour surgery. Public transport is eschewed in favour of just increasing the width of roads, leaving people shackled to slow, expensive-to-maintain, time-consuming-to-drive private cars for their travel needs. I have never seen an economic argument that supports the status quo: only political ones. For some reason, there's usually political will to reduce taxes. (There's currently a European Citizens' Initiative to increase taxes,[0] which has reached the required threshold in France and half the required threshold in Belgium,[1] making it the most popular Citizens' Initiative currently running,[2] but politicians tend to get elected by promising tax cuts.) There's also political will to keep inflation in check. There is rarely, if ever, political will to reduce the numerical quantity of money in circulation (except as it impacts inflation), so I predict that's where many of the resources will come from, if one of the currency-controlling governments (UK, US, EU, Sweden, etc) figures out how to fix some of these problems. [0]: https://feps-europe.eu/news/tax-the-rich-a-european-citizens-initiative/ https://feps-europe.eu/news/tax-the-rich-a-european-citizens... [1]: https://citizens-initiative.europa.eu/initiatives/details/2023/000006_en https://citizens-initiative.europa.eu/initiatives/details/20... [2]: https://citizens-initiative.europa.eu/_en https://citizens-initiative.europa.eu/_en