Economics Questions

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Wed, 10 Aug 2011 13:36:26 GMT

Rcder:

He starts with Mv=Py, where M is money supply, v is velocity of money, P is average price, y is quantity of production.

I don't have the book in front of me, but isn't this Irving Fisher's equation of exchange? If this is the case, then he's using a formula which I recall Rothbard (perhaps Mises?) identified as a fallacy since it was based on the assumption that an exchange between two goods sets their value as being equal. If all this this is true, then wouldn't the analysis presented by the economist in this article be flawed at best and completely wrong at worst?

Surely the question is, in the real world, can a person be right in their actual conclusions yet wrong in the reasoning used and reasons given to reach those conclusions?

Regards, onebornfree.

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Wed, 10 Aug 2011 04:08:49 GMT

Rcder,

Yes. I found it in MES. Mises also has a criticism of it [without writing out the equation] here

Re: article by John Harvey proving more money doesnt cause price inflation

Rcder — Wed, 10 Aug 2011 03:46:44 GMT

He starts with Mv=Py, where M is money supply, v is velocity of money, P is average price, y is quantity of production.

I don't have the book in front of me, but isn't this Irving Fisher's equation of exchange? If this is the case, then he's using a formula which I recall Rothbard (perhaps Mises?) identified as a fallacy since it was based on the assumption that an exchange between two goods sets their value as being equal. If all this this is true, then wouldn't the analysis presented by the economist in this article be flawed at best and completely wrong at worst?

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Wed, 10 Aug 2011 03:41:49 GMT

Smiling Dave:

If it is a simple q asked out of genuine curiosity, here's the answer. I will present the sequence of events in a timeline:

9 AM: Smiling Dave reads the John Harvey article. It raises doubts in his mind. Could the author be right? Dave is for the nonce undecided.

10 AM: Dave posts the gist of the article, expressing no opinion, and asks for comments. Comments could be pro or con.

11 AM: Esuric refutes the article. Dave is convinced of its flaws, reverts to his original position.

12 AM: Onebornfree asks for Daves opinion. Dave gives it.

I see. I asked because I could not understand why you would reference an article like that [while already being aware of the fact that you have previously disagreed with similar conclusions made by others that "increasing M may not increase P" ].

I guessed that either you were somehow now less sure of your previous position [for whatever reason], or perhaps that you were simply looking for some sort of "feel good" psychological validation of what you already "knew" via another member agreeing that that the author was talking out of his rear end and you were therefor merely engaged in publicly laughing at the authors "ridiculous" conclusions [i.e "hanging him out to dry"]. But I was not sure which, if any, of those two applied, that's all.

For what its worth, although I disagree with his reasons, personally I agree with the authors' conclusion ["increasing M may not increase P"] , although as I already hinted, I think that "increasing M may or may not increase P" is a slight improvement.

I also believe that that conclusion [ "increasing M may or may not increase P"] is fully consistent with Austrian monetary theory- at least as far as Von Mises' "The Theory of Money and Credit" goes.

Regards, onebornfree

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Wed, 10 Aug 2011 02:46:07 GMT

If it is a simple q asked out of genuine curiosity, here's the answer.

EDIT: Oops, it's been a long day. The article is about Milton Freidman's theory of inflation, which I do not subscribe to in the first place for other reasons. I was curious if the article had detected some basic blunder Freidman had made which I knew nothing about.

Re: article by John Harvey proving more money doesnt cause price inflation

Clayton — Wed, 10 Aug 2011 02:42:58 GMT

The value of money is determined by both the supply of money and the demand for money. Friedman's error is in agreeing with the Keynesians that money supply and demand cannot be analyzed in the same way as supply and demand of any other good. The only difference between fiat money and any other good is that the supply of fiat money can be increased without bidding away resources from other sectors of the economy. Hence, the natural interest rate is not necessarily affected by changes in the fiat money supply. This is explained by Hulsmann here.

Clayton -

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Wed, 10 Aug 2011 02:02:32 GMT

Smiling Dave:

This one:

So you posted the article because even though you "know" that the author's conclusions ["increasing M may not increase P, " ] "must" be "wrong", you were/are unable to refute his reasoning?

That was [and is] a simple question, asked out of genuine curiosity as to your reason for posting,not an accusation of anything. Why do you choose to see it as accusatory? Regards, onebornfree.

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Wed, 10 Aug 2011 01:51:36 GMT

This one:

So you posted the article because even though you "know" that the author's conclusions ["increasing M may not increase P, " ] "must" be "wrong", you were/are unable to refute his reasoning?

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Wed, 10 Aug 2011 01:29:30 GMT

Smiling Dave:

Careful reading of my posts will show me innocent of your accusations.

What accusations are you accusing me[ ] of making? Regards,onebornfree.

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Tue, 09 Aug 2011 23:39:48 GMT

Careful reading of my posts will show me innocent of your accusations.

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Tue, 09 Aug 2011 23:30:08 GMT

Smiling Dave:

onebornfree.

Thou barkest up the wrong tree.

Which would be......?

Regards,onebornfree.

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Tue, 09 Aug 2011 21:05:10 GMT

onebornfree.

Thou barkest up the wrong tree.

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Tue, 09 Aug 2011 20:09:35 GMT

Smiling Dave:

I think it will, always. But it might take a year or two.

So you posted the article because even though you "know" that the author's conclusions ["increasing M may not increase P, " ] "must" be "wrong", you were/are unable to refute his reasoning?

regards, onebornfree

Re: article by John Harvey proving more money doesnt cause price inflation

Smiling Dave — Tue, 09 Aug 2011 17:06:51 GMT

I think it will, always. But it might take a year or two.

Re: article by John Harvey proving more money doesnt cause price inflation

onebornfree — Tue, 09 Aug 2011 16:54:56 GMT

"increasing M may not increase P, " .

How about :"increasing M may, or may not not increase P", "

If we forget the rest of the fol de rol [i.e his reasoning, because maybe he's right but for the wrong reasons! ], would you say that you either agree, or disagree, with his claim ? Just curious. Regards, onebornfree