What will be the next economic reform gimmick policy to catch on in the U.S.? (user search)
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  What will be the next economic reform gimmick policy to catch on in the U.S.? (search mode)
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Author Topic: What will be the next economic reform gimmick policy to catch on in the U.S.?  (Read 5571 times)
True Federalist (진정한 연방 주의자)
Ernest
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« on: December 15, 2020, 01:44:16 PM »

I suspect zero inflation - as advocated by Bob Dole - might come back around.

Not anytime soon. Inflation remains low and almost unaffected by this year.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #1 on: December 22, 2020, 02:37:18 AM »

Not anytime soon. Inflation remains low and almost unaffected by this year.
The proponents of zero inflation have traditionally said that low rates of inflation are the second best option, but there are some very authoritative economists who prefer zero inflation.

Then they are ivory tower idiots of the sort who thought bimetalism could work.
It has been repeatedly shown that it impossible to fix any economic value at a constant, so it is impossible to achieve sustained zero inflation. Moreover, any attempt to achieve such a thing is likely to bring about deflation which is far more damaging to economies than modest inflation. Yes, we do need to guard against hyperinflation, but deflation is at least as poisonous. Whatever the theoretical benefits of zero inflation might be, they are unachievable in reality.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #2 on: December 27, 2020, 07:41:36 AM »

Then they are ivory tower idiots of the sort who thought bimetalism could work.

It has been repeatedly shown that it impossible to fix any economic value at a constant, so it is impossible to achieve sustained zero inflation. Moreover, any attempt to achieve such a thing is likely to bring about deflation which is far more damaging to economies than modest inflation. Yes, we do need to guard against hyperinflation, but deflation is at least as poisonous. Whatever the theoretical benefits of zero inflation might be, they are unachievable in reality.
Essentially zero inflation could become reality through a series of Fed targets. The GDP’s immediate decline would be 6%. But an annual permanent dividend of 1% would result, with a present GDP value of at least thirty percent.

See:
Martin Feldstein, Capital Income Taxes and the Benefits of Price Stability
Narayana Kocherlakota and Harold Cole, Zero Nominal Interest Rates: Why They’re Good and How To Get Them

As I said, "ivory tower idiots".  We have repeatedly shown we have neither the information nor the skill needed to achieve stable zero inflation outside theoretical simulations. Feldstein's paper assumes that stable zero inflation is achievable and then goes on to present econobabble purporting to show it would be desirable. Kocherlakota and Cole's paper similarly avoids dealing with the messy real world and operates within a fantasy abstract economic model.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #3 on: December 28, 2020, 12:24:56 AM »

Then they are ivory tower idiots of the sort who thought bimetalism could work.

It has been repeatedly shown that it impossible to fix any economic value at a constant, so it is impossible to achieve sustained zero inflation. Moreover, any attempt to achieve such a thing is likely to bring about deflation which is far more damaging to economies than modest inflation. Yes, we do need to guard against hyperinflation, but deflation is at least as poisonous. Whatever the theoretical benefits of zero inflation might be, they are unachievable in reality.
Essentially zero inflation could become reality through a series of Fed targets. The GDP’s immediate decline would be 6%. But an annual permanent dividend of 1% would result, with a present GDP value of at least thirty percent.

See:
Martin Feldstein, Capital Income Taxes and the Benefits of Price Stability
Narayana Kocherlakota and Harold Cole, Zero Nominal Interest Rates: Why They’re Good and How To Get Them

What are (some of) the assumptions behind this modeling?

You can find freely available PDFs of both papers on regional Federal Reserve Bank websites by googling the titles. I didn't bother looking in detail at the econobabble in either paper because they both presume policy makers would have perfect information about the macroeconomy and don't even bother to look at what happens under typical measurement errors for the current state of the economy. Granted, that would heavily complicate things, even assuming we'd be able to accurately judge what typical errors are and accurately determine the results of making policy decisions with imperfect information.

Problem is, historical results don't jive with the assumptions of these brief papers, effectively making them GIGO, even if the econobabble that tries to predict what happens if their assumptions are true is otherwise without error.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #4 on: December 29, 2020, 10:42:37 PM »

Consistent inflation below 1% (near zero inflation) would presumably approach the benefits of actual zero inflation.

Except it can't be realistically be achieved.

Between disasters, both natural and man-made, plus new technologies, the discovery and depletion of natural resources, and other ever-changing economic factors, we'll never have an economy sufficiently static that inflation could be tuned that exactly. Maybe a medieval economy could do that, assuming no pestilence or barbarian hordes plague the land, but such bucolic economies don't have a track record of providing for the people.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #5 on: February 03, 2021, 05:04:27 PM »

Banning self driving cars and trucks

Let's compromise and ban self-serve refuelling for self-driving cars, but only in New Jersey.
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