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Have we been thinking about inflation all wrong?

thewalrus.ca

391–400 of 518 posts

Re: Have we been thinking about inflation all wrong?

#391

Earlier quoted context omitted.

Austrian economics is all anti-empirical say-so internally-consistent models that aren't tested against reality. Traditional economics is stuff that claims to be more empirical but fails to do so and focuses almost entirely on official stats and on its own versions of models that aren't tested against reality. The whole field of economics is overall messed up. It's insular, arrogant, and extremely resistant to outsid…

I know Austrians make a lot of noise about “not being empirical” (to their detriment), but I think that’s a bit misinterpreted, and I get where they’re coming from. I get not wanting to try to parse out a theory from a stream of data complex enough to justify nearly any initial hypothesis. You can still test whether core ideas on the Austrian side fit the facts via historical analysis and looking at how things respon…

I'm no expert, I just have the impression that the field of economics professionally is basically a lost cause, at least until generational turn-over if even that.

Anything interesting has to engage with real facts like energy consumption, pollution, harvesting of raw materials, and somehow acknowledge the huge portion of human activities that are not measured in money. I don't know of anyone within economics who really does this, but if they exist, I am certain they are a pariah in the field, treated with contempt if even acknowledged by the rest of the folks.

I think there's something like "environmental economics" but I'm not sure the quality of it. I haven't looked in depth, but https://doughnuteconomics.org seems good, I just have the impression that it's enough work to just get people to even accept the basic premise, so there's not yet the depth of study that would get into the deep complexities, though I see no reason it couldn't get there.

On studying real humans as economic actors (rather than homo economicus), the best might be "behavioral economics" which is psychology, empirical, interested in real science (but arguably too behaviorist and not cognitive enough). I think they mostly only grapple with microeconomics and not macro. (I have the impression that the field of economics today, Austrians included, just have this say-so assertion that there is no macroeconomics beyond being just the sum of microeconomic patterns, and this leads to them refusing to study things on a macro level).

I have a friend who went to Japan to do economics grad-school work with some professor he thought was onto some better view, but it turned out that guy was a pariah of course who had no respect from colleagues, and the whole thing was a dead-end, and he eventually just gave up on economics having any hope as a field.

FWIW, I'm skeptical about aspects of what Marxists say often, but there's a good portion at least of concepts Marx talked about that are pretty darn sensible, and they are basically verboten because of the political biases in the field. When some topics that are intellectually sound enough are barred from discussion for political reasons, then it's just not an intellectually honest field of study. I've heard incidentally that Marx himself was anti-Marxist. There's a lot of confusion that gets wrapped up in associations people have with economic concepts versus the assertions of dogmatic political activists. I do respect Yanis Varoufakis (he calls himself an "erratic Marxist" to emphasize a non-dogmatic view that includes and respects ideas from Marx). If I have to pick one reference to suggest, I'd go with him at this point.

If anyone else has a good reference that really engages with these things, I'm curious too

Re: Have we been thinking about inflation all wrong?

#392

Earlier quoted context omitted.

Austrian economics is all anti-empirical say-so internally-consistent models that aren't tested against reality. Traditional economics is stuff that claims to be more empirical but fails to do so and focuses almost entirely on official stats and on its own versions of models that aren't tested against reality. The whole field of economics is overall messed up. It's insular, arrogant, and extremely resistant to outsid…

More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. These Econ professors are responsible for inflating a giant bubble based on their politically motivated propaganda. Inflation is not about prices, it’s about simple math. Printing dollars out of thin air, makes the ones in your pocket less powerful. But if you are a the direct beneficiary of the newly p…

> This is why cryptocurrencies that burn crypto are considered deflationary.

By whom? The idea of a "deflationary currency" isn't supported by any economic theory.

Re: Have we been thinking about inflation all wrong?

#393

Earlier quoted context omitted.

Inflation is easily caused without a fresh supply of money. Destroy your productive capacity => inflation.

No, money really is essential. If you destroy your productive capacity but money supply remains the same (which is honestly a bit odd, since real prices are always relative), then you get substitution effects that don't affect the general price level, only the price levels in particular segments of the economy. (I would expect the prices of products, capital goods and human capital to increase, and the price of commo…

> "I would expect the prices of products, capital goods and human capital to increase, and the price of commodities and goods related to distribution to decrease"

If wages go up, that comes from the companies; does that mean trickle-down econ worked, starting from low interest rates?

Re: Have we been thinking about inflation all wrong?

#394

Earlier quoted context omitted.

Inflation is easily caused without a fresh supply of money. Destroy your productive capacity => inflation.

No, money really is essential. If you destroy your productive capacity but money supply remains the same (which is honestly a bit odd, since real prices are always relative), then you get substitution effects that don't affect the general price level, only the price levels in particular segments of the economy. (I would expect the prices of products, capital goods and human capital to increase, and the price of commo…

> If you destroy your productive capacity but money supply remains the same (which is honestly a bit odd, since real prices are always relative), then you get substitution effects that don't affect the general price level, only the price levels in particular segments of the economy.

Because the destruction of capacity somehow didn’t affect the substitutes? That’s magical thinking.

There’s a shortage of new cars => used car prices skyrocket (alone this accounts for roughly ~1.5 points of the cpi increase). And no, it’s not simply because demand is higher for cars, new car sales are still below pre pandemic levels.

> Inflation is really always and everywhere a monetary phenomenon.

It can be one, and that is certainly a contributing factor here, but if you can see the obvious supply chain/shift in demand due to covid effects, then you’re just blinded by dogma.

Re: Have we been thinking about inflation all wrong?

#396

Earlier quoted context omitted.

I know Austrians make a lot of noise about “not being empirical” (to their detriment), but I think that’s a bit misinterpreted, and I get where they’re coming from. I get not wanting to try to parse out a theory from a stream of data complex enough to justify nearly any initial hypothesis. You can still test whether core ideas on the Austrian side fit the facts via historical analysis and looking at how things respon…

I'm no expert, I just have the impression that the field of economics professionally is basically a lost cause, at least until generational turn-over if even that. Anything interesting has to engage with real facts like energy consumption, pollution, harvesting of raw materials, and somehow acknowledge the huge portion of human activities that are not measured in money. I don't know of anyone within economics who rea…

Yanis Varoufakis sounds interesting. Will check him out, thanks. Doesn’t align with my sensibilities at all/am generally allergic to anything described as Marxist, but the way you describe him and the misconceptions sounds worth looking into/I should challenge myself. I view Marx as more of a social analyst and a historian rather than an economist/a lot of what I understand of what he advocated for economically seems extremely misguided, even if his social and historical analysis had merits. But I’m open to a deeper look and a more modern take.

Re: Have we been thinking about inflation all wrong?

#397
post #348

Earlier quoted context omitted.

Stability in the current economic discourse implies growth at all costs due to the way that our monetary systems are organized. "If we didn't raise the debt limit our economy would collapse"; discourse on "countries must meet their growth targets" e.g.

It absolutely doesn’t imply grow at all costs . And, you seem to think GDP is consumer goods, but GDP is what pays for social safety nets, healthcare, etc.

It actually does. What happens if you stop growing the money supply? The system crashes because you force a cascading inability to repay debts (this is just math and is unavoidable). Growing the money supply without growing the economy also means crashes. So, yeah. Stability under our current system means grow at all costs.

Re: Have we been thinking about inflation all wrong?

#398

Earlier quoted context omitted.

Sure because the people who decide what is "good for the economy" have different interests than pretty much every other individual in it.

It’s a real thing: https://en.m.wikipedia.org/wiki/Paradox_of_thrift You get ahead by saving, but everyone can’t do that all together or the economy collapses.

It's a model that makes behavioral assumptions that are provably wrong. The fact that people buy computers despite prices going down contradicts the underlying assumption. There is nothing particularly special about computers among all goods.

Re: Have we been thinking about inflation all wrong?

#399

Earlier quoted context omitted.

"People who have debt" is dominated by financialized instruments: shorts, options, forex, margin trading, etc. all exist due to easy access to debt at low interest rates.

"People who have debt" is dominated, surprisingly enough, by people with debt. There are a lot more people with mortgages than people making leveraged trades. For the rich loss of an opportunity to cheaply leverage their wealth is the gain of opportunities to lend their wealth at usurious rates instead, or to profit at the expense of the productive from simply selling off their assets and doing nothing with their cas…

You're counting domination in number of people. I'm counting domination in number of dollars.

Re: Have we been thinking about inflation all wrong?

#400

Earlier quoted context omitted.

To be frank, for a small sliver of wage:mortgage ratios this could be fucking fantastic... for "young wage-earners" who already have a house (like me! but I'm not really that young anymore). For other wage-earners, not so much, sad trombone.

Bought a house 4 months ago and suddenly all this inflation stuff is basically just telling me I can pay it off much faster than I thought.

Sadly it doesn't work that way, unless you can get pay raises that match inflation. Remember, inflation is a policy choice to screw you out of your wages because you have "sticky" preferences. So, if you are getting pay raises that match inflation, the policy isn't working.
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