brightsparkey Posted September 15, 2021 Report Share Posted September 15, 2021 I recently read an interesting article about the true measure of inflation, and given that the official government CPI and RPI figures always seem so unreliable, what with gerrymandering of the basket etc. finding a more fundamental concept of inflation was interesting. The formula was basically: GDP growth - M4 growth = inflation on the basis that money supply and GDP should go hand in hand if money is to maintain its value and that any deviation in the money supply would result in inflation. The supposition is that prices as such are irrelevant as they are set by what people will pay,and that the value of money as a medium of exchange is what's of interest. Its simple and there is some rationale behind it and the resulting figures tally well with my perception of past prices etc. over a long span. but is it a reasonable concept - how legitimate is the theory behind it? Now I know that this is at odds with traditional measures of inflation invariable based on a 'basket' of goods - it seem to me that this is leaving out whole swathes of the economy such as property, investments and paper instruments. This subtractive approach seems to be more in line with aims of politics than measuring the value of money. thanks for any thoughts. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Brightsparkey, It is commonly assumed that inflation comes from over-expansion of the money supply. But if this was true, it would mean that everyone selling something is measuring exactly how quickly the money supply is expanding and how much to raise prices. Does this sound realistic to you? A much better measure of inflation is the gradual rise in ground rent. Higher rents for retailers require higher prices. But what causes ground rent to rise? Increased economic activity in a given area increases interest in land there. As a city's economy grows (more jobs, more amenities) the area becomes more desireable. Inflation does not just keep pace with economic growth. It is caused by economic growth. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 If you are interested in measuring inflation concretely, measure the rise of property values in a given locale. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 3 hours ago, Sebastien said: It is commonly assumed that inflation comes from over-expansion of the money supply. But if this was true, it would mean that everyone selling something is measuring exactly how quickly the money supply is expanding and how much to raise prices. No. As people who receive extra money spend it, this increases demand, which raises prices. As some prices go up, this increases some people's costs, so they have to raise prices or bargain for higher pay. People are reacting to the market conditions they encounter. Even if they aren't even aware of the expansion of the money supply, inflation happens. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Doug Morris, You are assuming that people spend extra money, rather than saving it or investing it. This is not self-evident as deterministic consumer behavior, nor is it empirically supported. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 The empirical data collected since WWII suggests that people have spent extra money on their children's college education, not on commodities. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 35 minutes ago, Sebastien said: You are assuming that people spend extra money, rather than saving it or investing it. This is not self-evident as deterministic consumer behavior, nor is it empirically supported. There will be some spending. How much depends a lot on what sort of people receive the extra money. Increased saving will, by supply and demand, reduce interest rates and increase borrowing. Much of the borrowed money will be spent on one thing or another. Increased investing will increase spending on capital improvement. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 43 minutes ago, Sebastien said: The empirical data collected since WWII suggests that people have spent extra money on their children's college education, not on commodities. Which people? Which extra money? More money spent on education leads to more money spent by educational institutions. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 47 minutes ago, Sebastien said: not on commodities. I am talking about spending in general, not just on commodities. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Doug Morris, I'm not interested in having this conversation with you. What fault do you see in my argument, specifically? Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 1 minute ago, Sebastien said: What fault do you see in my argument, specifically? I thought I made that clear enough. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 What you are articulating is called economic determinism. Economic determinism is that every action of an economic agent is predictable and follows definite laws. Economic determinism is not at home in Objectivism. Objectivists maintain that individuals have free will, and their behavior can only be examined in retrospect, not predicted. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Doug Morris, If you don't stop harassing me I'm going to report you. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 If you go to Hawaii, you'll notice that prices of everything are higher. If you go to Missouri, prices of cigarettes are lower. Prices keep pace with ground rent. End of argument. Quote Link to comment Share on other sites More sharing options...
Eiuol Posted September 24, 2021 Report Share Posted September 24, 2021 Please stick to single posts rather than multiple posts within minutes. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 1 hour ago, Sebastien said: What you are articulating is called economic determinism. No, not at all. When people pursue their own interests in a given situation, this makes their actions somewhat predictable. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 1 hour ago, Sebastien said: If you don't stop harassing me I'm going to report you. I have answered just a fraction of your posts. I am addressing the issues, not the person. How does this constitute harassment? Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Doug Morris, That is according to mainstream economics, not Objectivist economics. Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 1 hour ago, Sebastien said: Prices keep pace with ground rent. This is just part of the picture. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Doug Morris, The reason you are not going to win this argument is because you are defending a position that is not in accordance with Objectivist theory. If you want to win this argument, you need to base your premises on Objectivist theory. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 If I am acting out of self-interest (which I am), then make a prediction. What am I going to say or do next? Quote Link to comment Share on other sites More sharing options...
Doug Morris Posted September 24, 2021 Report Share Posted September 24, 2021 2 minutes ago, Sebastien said: If I am acting out of self-interest (which I am), then make a prediction. What am I going to say or do next? In some circumstances, self-interested actions are somewhat predictable. Your understanding of Objectivism is strange, making it difficult to predict what you will say. If you see a prediction of your actions, you can act so as to make it fail. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 I actually successfully predicted that you would suggest looking at a prediction and acting to make it fail. Do you know why? Because I perceive very clearly that you are on a power trip, and you're enjoying the ride while trying to pretend that you are not being an asshole. I know your premises. I can read them like a book. Don't mess with me. Find another punk who has a chip on his shoulder like you. Then you can play arrogant together. Me? No thank you. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 My understanding of Objectivism is strange? You better do some studying because I've been studying Objectivism a lot harder than you, which is made very clear simply by critically observing the points you made with absolutely no sense of pride, integrity, or any morsel of good character at all. Quote Link to comment Share on other sites More sharing options...
Sebastien Posted September 24, 2021 Report Share Posted September 24, 2021 Don't. Mess. With. Me. Quote Link to comment Share on other sites More sharing options...
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