Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Inflation is differential and restructuring (2021)

economicsfromthetopdown.com

Post reply on HN
Print view View original

81–90 of 215 posts

Re: Inflation is differential and restructuring (2021)

#81

Post by twic »

I'd be interested to see plots of median or upper-quartile inflation across the CPI categories in there too. In periods of high inflation, is the high variation really random variation about an increased centre, or does it reflect the departure of an extreme from an unchanged centre?

In the article and my suggestion, there's also an unexamined assumption here that the CPI categories are peers, on which it's valid to do statistics. It's not clear to me that "medical care commodities" and "shelter" are really things it makes sense to take an arithmetic mean of.

Re: Inflation is differential and restructuring (2021)

#82

Post by pjc50 »

kklisura wrote: post #75

As an absolute layman to this field, the Friedman’s "inflation is ‘always and everywhere a monetary phenomenon’" has appeal to me in that it offers a (simple?) solution: "government austerity" as noted in the article. Whenever I read other views on inflation and even this article, they fail on providing any solution for either fixing or taming the inflation.

Simple, easy to understand, and ineffective solutions are always popular.

The classic policy lever works just fine for the past 30 years or so in the west: whenever inflation goes up, put up interest rates. That raises the cost of credit, puts people out of work and closes marginal businesses, thereby reducing demand.

If you look at https://www.macrotrends.net/countries/USA/united-states/infl... it's been kept perfectly in the 0-4% range by this process.

Re: Inflation is differential and restructuring (2021)

#83

Post by yyy888sss »

Inflation is an expansion in the money supply, such as new discoveries of gold or or printing paper money or creating credit. A baker would say he will 'raise' or 'lower' the price of his bread, not 'inflate' it. Defining inflation by the CPI or a similar measure is like defining the rain as a "increase in height of a river". It is the rain that CAUSES the rise in the river, and inflation CAUSES a general rise in prices.

Re: Inflation is differential and restructuring (2021)

#84

Post by pjc50 »

frankfrankfrank wrote: post #57
lordnacho wrote: post #39

Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days: - 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.…

The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you de…

> then more of those coupons are just forged than correspond to actual work having been done

Is this Karl Marx's critique of inflation?

Re: Inflation is differential and restructuring (2021)

#85

Post by sudden_dystopia »

Seemed like a long winded persuasion that monetary policy doesn’t matter all that much and that at the end of the day, the disaggregated inflation we experience in the real world is the result of oligopolies, which to me, seems like a subtle plug for MMT.

I don’t buy it. I have heard plenty of economists and economically savvy people call BS on CPI as a metric for the very same reasons outlined here. CPI is a fallacy, mostly pushed by the the govt since it tends to generally be favorable to them and disguise the disaggregated nature of inflation. But that doesn’t mean that the underlying economic principles are false.

Re: Inflation is differential and restructuring (2021)

#86

Post by klipt »

ekianjo wrote: post #79
lordnacho wrote: post #63

Earlier quoted context omitted.

> The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. Yeah this true, but I wonder if it's as straightforwardly sinister as that. I'm sure there are a lot of eco…

> f people want to exchange more, they need more coupons. thats a fallacy. nothing prevents you from exchanging more even if you had a fixed number of coupons. you would just have to consider that the value of each coupon becomes more, not less, over time, so you need to use subdivisions of coupons more. Inflation, even at low levels, is ultimately value destruction over time.

> the value of each coupon becomes more, not less, over time

Deflation has historically been a bad thing every time it's happened.

Re: Inflation is differential and restructuring (2021)

#87

Post by BlargMcLarg »

refurb wrote: post #72
BlargMcLarg wrote: post #55

Earlier quoted context omitted.

Do you think those increases truly make up the huge gap between productivity increase and hourly wage increase? What's more, do you think most of near median earners get any significant benefits? I don't think article is necessarily wrong in pointing out the huge gap when most big total comp increases only seem to apply to the upper middle class. At the very least, I don't think Pizza Friday is going to make up that…

I think you’re underestimating the impact of non-wage compensation, even for normal, middle class jobs. Your “pizza Fridays” is a pretty flippant way to describe things like health insurance, retirement benefits, etc. When you add up the share of income that goes to employees, total compensation growth keeps up with productivity growth. https://www.nber.org/digest/oct08/total-compensation-reflect...

The source you cite goes up to 2006 and related paper was published in 2008. Surely I don't have to point out the many changes that happened in the last 15 years. I could find a few papers past 2008 saying the exact opposite.

I agree total comp is the better metric, but your source doesn't really do anything to dispel skepticism when many current day anecdotes lament the lack of secondary benefits beyond said Pizza Friday. A fair number of Americans are given contracts which skirt the border of having to be paid secondary benefits. At the same time, those are primarily the Americans who are most sensitive to price increases in food, gas, rent, real estate (even if this isn't part of inflation), utilities and more. If there is are decisive sources talking about pre- or even post-COVID, that'd be another story.

Re: Inflation is differential and restructuring (2021)

#88

Post by incrudible »

orwin wrote: post #28
bojangleslover wrote: post #13

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…

> Friedman was still right. that would made his inflation theory the only theory he was right about. Even in this case, 90+% of the money supply is created by private banks, so wouldn't that make big bank responsible for inflation?

Banks create this money through lending with the intent to profit, which means they take on risks they would not otherwise take on if so called risk free interest is suppressed by central bank policies like low overnight rates and QE.

Of course, the money created in this way is spent mostly on assets, so all the price inflation mostly happens there, not in the CPI. Friedman is still right if we look at these markets as largely disjoint.

Re: Inflation is differential and restructuring (2021)

#89

Post by lbriner »

The problem is that politicians and armchair critics prefer simple sound-bites like "government spending caused this problem" or perhaps "a lack of government spending caused this problem", I can't imagine how many frowns you would get in parliament/congress if your explanation of why inflation is so high was as long as the article, even if it was much more accurate than a sound bite.

People don't like the fact that the world is complicated and more inter-dependent than ever. I guess that's why some people go and live in the wilderness.

Re: Inflation is differential and restructuring (2021)

#90

Post by I_am_tiberius »

I think Friedman's general idea is correct. For me inflation is not about individual price levels but about the potential of increased/decreased price levels. If money supply increases, it makes room for increased price levels. Without increased money supply, it would only be possible for a product price to increase if another product price decreases. In reality I think inflation already occurs when money supply is increased - it's just not priced in as it takes time for prices to adjust. However, the period of time in which the increase happens, cannot be predicted - e.g. it can be 1 year or 100 years.
Post reply on HN