31–40 of 215 posts
The non-uniformity of inflation is interesting and has been brought up by many economists recently. I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.
The author talks about how accounting identifies are weird gotchas but the problem here isn't that there is a weird gotcha, the problem with MV = PT is that pretty much all variables are unknown except the general price level. Nobody knows what the real quantity of money is, nobody knows what the velocity is since it would require marking individual dollars and counting how many times they change hands.
The problem with the monetarist version of MV = PT isn't that we can't measure the variables, it's that we have measured the variables and that makes it clear that the monetarist assumption that the residual V is fairly stable in the long run and with respect to monetary policy change is clearly incorrect.
How should tech workers be negotiating yearly raises taking inflation into account and should they even wait a year before approaching HR? What are some counter-arguments I should prepare myself for?
They shouldn’t. Tech worker compensation doesn’t follow inflation, it follows investment in the tech industry. So in this situation where you have high inflation causing interest rate hikes, you should expect your compensation to stay the same (if you keep your job, due to inelasticity) or to fall (because you were made redundant).
If however you work in Wendy’s, then your wages (note that nobody talks about service workers having compensation) are somewhat more determined by inflation because if Wendy’s gives all their workers a real wage cut they will probably quit en mass.
Inflation, in all theories, doesnt measure the change in quality of the product either. Planned obsolescence is a stealth and legal form of product destruction that the buyer doesnt know about until after they have purchased something which is why the saying exists "buyer beware".
Earlier quoted context omitted.
> Staple foods might cost 25% more, but hey, those TVs are down 20%, so yay! It's even worse than that because most of the time the TV price don't really goes down by 20%, but by 3% and hedonic adjustment makes it appear as if it went down by 20% in CPI because some people estimated that going from HD to 4K increased the value by 17% … That's how we get figures saying that computers cost 20 times less than what they…
> That's how we get figures saying that computers cost 20 times less than what they used to be when in reality it costs a little less than 2 times less. Can't you buy old PCs for 20 times less than a (second-hand) modern PC? I bet this Pentium 4 desktop cost around NZ$2000 new: https://www.trademe.co.nz/a/marketplace/computers/desktops/n... but now it's going for NZ$100.
How should tech workers be negotiating yearly raises taking inflation into account and should they even wait a year before approaching HR? What are some counter-arguments I should prepare myself for?
> How should tech workers be negotiating yearly raises taking inflation into account They shouldn’t. Tech worker compensation doesn’t follow inflation, it follows investment in the tech industry. So in this situation where you have high inflation causing interest rate hikes, you should expect your compensation to stay the same (if you keep your job, due to inelasticity) or to fall (because you were made redundant). I…
I disagree as my purchasing power has decreased by the average price of goods. Naturally, when I ask for my yearly raise I want to be certain I am also being compensated for a commensurate loss in purchasing power.
Why can't it be both monetary and non-monetary? Say it's a vector, one element per CPI category. Throw housing in for good measure. The direction of this vector can change due to non-monetary stuff like Russia and oil. But if all of the categories, especially those without clear non-monetary drivers, rise, then it's also monetary. So maybe X = p_monetary + Q_nonmonetaty where p is a scalar and Q is a vector. I think…
Monetary inflation is an increase in the money supply which happens when more money is borrowed, usually as a result of lower interest rates. Price inflation is in increase in the prices of good and services.
Monetary inflation causes price inflation and other things can also cause price inflation. But it's meaningless to add up monetary inflation and price inflation.
This is an excellent article. It is well written, relatively easy to follow, and the explanations are well supported by data. Cheers to the author.
(Especially since the silly economists actually have lots of theories about how specific instances of inflation are driven by dynamics of one particular sector like fuel prices to test against the "oligopoly" theory)
- There's an authority about the field that really isn't deserved. The models are not made properly, and there's a lot of hand-waiving. I studied economics with a class of engineers and everyone pointed this out.
- The pop-sci version of economics is a bunch of easy quips. Friedman's "everywhere a monetary phenomenon", Keynes "In the long run".
- The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers. A more nuanced version of economics does exist, but the appeal to authority is strong in the field, because there's no real reasonable arguments, it's actually politics.
- Inflation is more interesting in a disaggregated view, for reasons mentioned. You can't look at it as a single figure.
- Relative price changes are what matter in society, because they represent changes in negotiation terms between different actors. Post-pandemic and Ukraine, we should expect to see more shortages as well as more strike action. Various groups like the RMT union will decide they need to flex their muscles. Chip shortages will cause negotiation positions to change across a wide variety of affected sectors like cars, meaning push will come to shove for certain lines of business.
To me it absolutely is, because you can only keep borrowing money and paying the (increasingly large) interest on it for so long. Eventually it'll exceed your revenue and you have no choice but to print money and hyperinflate your currency... right? Yet modern economists keep arguing it's... fine? "It's not like your household debt" or whatever the argument is.