🚀 go-pugleaf

In article <93Jan22.114651edt.574@neuron.ai.toronto.edu> radford@cs.toronto.edu (Radford Neal) writes:
|In article <1jngr2INNfq7@darkstar.UCSC.EDU> david@cats.ucsc.edu (David Michael Wright) writes:
|
|>Unanticipated inflation is, in general, a good thing: if wages are
| -----------------------
|>sticky it gives you the opportunity to work if the real wage is
|>reduced, it makes you economize on money balances so you invest more,
|>it reduces debt and thereby makes it easier to invest, it gives a
|>signal that the economy is improving (which it may be for the
|>reasons above or not) and so boosts consumer confidence. Moderate inflation 
|>has nearly always been associated with rising output.
|>
|>Of course, high inflation, or too variable an inflation rate, makes it
|                               ------------------------------
|>impossible to judge the difference between real and nominal prices,
|>and so the whole economy can go down the tubes. Anticipating this
|>event also is disasterous.
|
|
|These statements are contradictory. If the inflation rate is not
|variable, then the inflation will be anticipated, assuming a modicum
|of intelligence among the population.

Well, I would say unclear, not contradictory. In the first case, we
have unanticipated mild inflation, the adjective mild is stressed.
Therefore, the costs of confusing general with relative prices is
miniscule. The optimal inflation rate is then mild, somewhat
unpredictable, and although varies somewhat, soes not vary a great
deal. It cannot be predicted, and more than likely will be too costly
for any indiviudual to predict on his own, yet this none the less has
large social effects. 

|You also fail to explain why solving the problem of "sticky" wages
|via inflation is preferable to solving it some other way. 

I know of no other way to solve the sticky wage problem off hand, but
certainly it is in each individual's interest to have sticky wages, so
that efforts to end them would likely prove hopeless.

-- 
"There is nothing in the marginal conditions that     
    distinguish a mountain from a mole hill"            
                      Kenneth Boulding                             

					All comments  are mine---(David Wright) 
						david@cats.ucsc.edu.