I've been thinking a lot about this post by Steve Randy Waldman, a very smart and open minded young economist. In this provocative post, economic depression is our revealed preference as a society (mainly influenced by those with more wealth, of course), since rather than fight the depression at a risk of modest inflation, policy makers have only been inclined to take only much smaller and therefore ineffective measures.
Well of course there are a lot of presumptions here that some of my friends won't agree with. Some might not agree that monetary or fiscal expansion would even address the problem. That was the point made, finally, in comments 243 and 244. I have a response to those posts. They merely assert that monetary or fiscal expansion will not create new jobs, that it will create inflation, and that inflation will hurt poor and young people the most. They provide no evidence or even argument for this. This sounds plausible if you don't think about it, so they hope you won't.
Rather than refuting their claim in detail, I suggest you read on for an entirely different way of looking at the problem.
And I have a lot of other thoughts on Randy's post. But what struck me as most important is this one, something I've been thinking about for the last year or two actually.
Most friends of mine do not actually fear inflation, as such. Inflation is defined as a rise in prices. One of those prices is the price of labor, or conversely wage income. Not only would most of my friends not fear that, they would greatly desire it. What they fear is the cost of goods, mainly, and services they consume, which is not (in the case of any of my friends) the cost of employing someone.
Now some people have small business, or own or operate large businesses and identify with the interests of the owners, who do fear the price of labor very directly. They would like to see that stay low, or even get lower. And, it turns out, that people who identify with the interests of capital like that have quite a bit of political power nowadays. But they would not like to see the price of the good or service they sell do that, as with wages for workers, they would love to see their product or service sell in as much volume (or more, of course) as it currently does but at an even higher price, if it could. Mostly, they would like to see their profit be the highest (and interesting that Profit does not appear in inflation) but their product or service price is a pretty good proxy.
It is my feeling that utility is most greatly served by serving first the needs of the workers. Therefore I will choose to look at things that way also. What workers are really worried about is not properly called inflation. I would call it Affordability, and define it as the price of goods and services used by a consumer, divided by the income of that consumer.
This could be somewhat captured by taking an inflation index and dividing it by the median wage. To be complete, the median wage should also be scaled by the employment participation ratio.
Well of course there are a lot of presumptions here that some of my friends won't agree with. Some might not agree that monetary or fiscal expansion would even address the problem. That was the point made, finally, in comments 243 and 244. I have a response to those posts. They merely assert that monetary or fiscal expansion will not create new jobs, that it will create inflation, and that inflation will hurt poor and young people the most. They provide no evidence or even argument for this. This sounds plausible if you don't think about it, so they hope you won't.
Rather than refuting their claim in detail, I suggest you read on for an entirely different way of looking at the problem.
And I have a lot of other thoughts on Randy's post. But what struck me as most important is this one, something I've been thinking about for the last year or two actually.
Most friends of mine do not actually fear inflation, as such. Inflation is defined as a rise in prices. One of those prices is the price of labor, or conversely wage income. Not only would most of my friends not fear that, they would greatly desire it. What they fear is the cost of goods, mainly, and services they consume, which is not (in the case of any of my friends) the cost of employing someone.
Now some people have small business, or own or operate large businesses and identify with the interests of the owners, who do fear the price of labor very directly. They would like to see that stay low, or even get lower. And, it turns out, that people who identify with the interests of capital like that have quite a bit of political power nowadays. But they would not like to see the price of the good or service they sell do that, as with wages for workers, they would love to see their product or service sell in as much volume (or more, of course) as it currently does but at an even higher price, if it could. Mostly, they would like to see their profit be the highest (and interesting that Profit does not appear in inflation) but their product or service price is a pretty good proxy.
It is my feeling that utility is most greatly served by serving first the needs of the workers. Therefore I will choose to look at things that way also. What workers are really worried about is not properly called inflation. I would call it Affordability, and define it as the price of goods and services used by a consumer, divided by the income of that consumer.
This could be somewhat captured by taking an inflation index and dividing it by the median wage. To be complete, the median wage should also be scaled by the employment participation ratio.
No comments:
Post a Comment