Re:Cities Experiment with Remedy for Poverty: Cash, No Strin...
by nwah1 on Tuesday September 29, 2020 @10:53AM
(#24628536)
Inflation has two definitions. There's monetary inflation and price inflation. The former refers to an expansion in the money supply. If you fund any social program purely out of tax revenue, then there is no monetary expansion.
But monetary inflation itself doesn't necessarily lead to price inflation. If you have a quickly growing population, but a money supply that is growing slowly, then you would need faster monetary expansion simply to maintain price stability.
Price inflation is what people really care about. But it is also not just one uniform thing. We know that healthcare, land rent, and education are what have been rising in the US over many decades, while things like food, clothing, electronics, energy, and raw materials have been pretty flat or even decreasing in price.
The distinguishing factor is that the former tend to have both inelastic supply and inelastic demand, while the latter category has elasticity in both. What this means is that the former category is characterized by economic rents more than supply costs. Easy monetary policies may inflate bubbles in these targeted areas, but the fact that it is so localized gives a clue as to the real cause: economic rent-seeking and landlordism. Pre-capitalistic and parasitical sorts of business models, often relying on the government to create artificial scarcity. If this stuff happens in essential industries then it also means the demand is inelastic, and we're forced to eat the higher prices, which are whatever they think the consumers can afford.
All of this means that without tackling the economic rents, such as by raising tax revenues that target them, then we cannot solve this problem. And if people can afford more, the economic rents will increase. For instance, via a basic income that is not funded out of economic rent. But if it were funded out of rent, then it would be fine. Taxes that are placed upon economic rents have a curious property where they cannot be passed onto anyone else. Zero deadweight loss.
But monetary inflation itself doesn't necessarily lead to price inflation. If you have a quickly growing population, but a money supply that is growing slowly, then you would need faster monetary expansion simply to maintain price stability.
Price inflation is what people really care about. But it is also not just one uniform thing. We know that healthcare, land rent, and education are what have been rising in the US over many decades, while things like food, clothing, electronics, energy, and raw materials have been pretty flat or even decreasing in price.
The distinguishing factor is that the former tend to have both inelastic supply and inelastic demand, while the latter category has elasticity in both. What this means is that the former category is characterized by economic rents more than supply costs. Easy monetary policies may inflate bubbles in these targeted areas, but the fact that it is so localized gives a clue as to the real cause: economic rent-seeking and landlordism. Pre-capitalistic and parasitical sorts of business models, often relying on the government to create artificial scarcity. If this stuff happens in essential industries then it also means the demand is inelastic, and we're forced to eat the higher prices, which are whatever they think the consumers can afford.
All of this means that without tackling the economic rents, such as by raising tax revenues that target them, then we cannot solve this problem. And if people can afford more, the economic rents will increase. For instance, via a basic income that is not funded out of economic rent. But if it were funded out of rent, then it would be fine. Taxes that are placed upon economic rents have a curious property where they cannot be passed onto anyone else. Zero deadweight loss.