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Thread: Alright here's a question for you all

  1. #1
    Member zago's Avatar
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    Alright here's a question for you all

    I was reading this a while back. Yudkowsky basically claims that Japan's economy was experiencing stagnation because they weren't printing enough money. They started printing money, and the economy got better.

    I'm open minded to understanding how that was the correct thing to do, but honestly I'm still scratching my head about it all. Given that I'm kinda lazy and not a huge fan of reading about economics, I figured maybe someone here could give me a simple explanation.

    Here's how I currently see things. Money is a medium of exchange, and wealth in terms of money is relative. Therefore, it doesn't matter if there are 1 million dollars in circulation or 1 billion, things will look exactly the same just with 3 more or fewer 0s. Any printing of money, then, can be represented literally and exactly as taxation and redistribution. Am I mistaken so far? I feel like I'm not. This makes sense.

    So would Yudkowsky and the economists he got his information from agree that the same effect could have been achieved through taxation and redistribution? When they claim that Japan "isn't creating enough money", is that merely another way of saying that some people had too much and some too little?

    Some people have told me that money should be inflated to keep people from holding on to it too much. Okay, but is that not the exact same thing as saying it should be taxed and redistributed for the same reason?

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    Member Tekton's Avatar
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    Iím not familiar with the particular economist youíve referenced, but from what I know (which is the result of a passing interest in monetary policy and nothing more) your basic understanding of the issue vis-a-vis the relative value of a yen is correct, but incomplete. More relevant than whether there are 1 million or 1 billion yen is less important than whether the money supply is increasing or decreasing. The basic line of thought is this:

    Itís better for there to be a little inflation, because it means that a person is better off spending their money on a useful good, service or investment than letting it sit around, its value slowly evaporating.

    On the other hand, when there is slight deflation, it promotes saving, because why would I buy that pair of socks now when it will just be cheaper next month? This is great for people whoíve got money to save, but not so great for manufacturers, and, consequently employment and economic growth.

    The other consideration is the method by which a central bank increases the money supply: giving it to banks. Banks *hate* to have excess cash on their balance sheet because itís not doing anything. Give them cash, and they lend it out to make it earn interest.

    This, counterintuitively, is why the infusion of cash given to banks in the critical moments of the American financial crisis didnít yield the growth we were all told it would: they were insolvent; they didnít have enough cash on hand to pay their own debts. Just sitting on the money congress gave them was the correct thing to do.

    Please excuse my excessive use of colons.

  3. #3
    Senior Member jyng1's Avatar
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    Quote Originally Posted by zago View Post
    So would Yudkowsky and the economists he got his information from agree that the same effect could have been achieved through taxation and redistribution?
    Printing money is distribution and then taxation. Austerity restricts money supply and as a consequence reduces taxation (why the UK has increased it's indebtedness after several years of austerity - the very opposite that austerity was meant to achieve).

  4. #4
    Now we know... Asteroids Champion ACow's Avatar
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    Quote Originally Posted by zago View Post
    Here's how I currently see things. Money is a medium of exchange, and wealth in terms of money is relative. Therefore, it doesn't matter if there are 1 million dollars in circulation or 1 billion, things will look exactly the same just with 3 more or fewer 0s. Any printing of money, then, can be represented literally and exactly as taxation and redistribution. Am I mistaken so far? I feel like I'm not. This makes sense.

    So would Yudkowsky and the economists he got his information from agree that the same effect could have been achieved through taxation and redistribution? When they claim that Japan "isn't creating enough money", is that merely another way of saying that some people had too much and some too little?
    I don't think I'm familiar with Yudkowsky, but the short answer is that no, its more complicated than that.

    In a simple model of the world, you might think that money is neutral and just adding another 3 zeros onto your money supply just adds another 3 zeros. And that simple model does explore a partial-truth that is important in knocking down a few low level policies: i.e. the classic grade-school question of "well if people are poor, why don't we just print and give them more money?"

    But the real world is far more complicated.

    Firstly, money doesn't just magically appear in the economy. It has to get their via some mechanical means. And while you may be at point A and want to get to a modeled goal of policy point B, what you actually have to do is go through intermediate points. And once you've gone through all the intermediate points and you hit point B, what then happens on the other side? Will that be affected by how to approached point B?

    Secondly, most economies and currencies are open: the bank of japan has controls on currency demarcated in yen (which is held and used by japanese citizens in the running of the japenese economy, but also to a point by external holders of the currency interacting with the economy from an external point of view). The government of japan (i'm presuming) controls taxation policies on the population within japan's borders or sphere of influence (and presumably, at the border to some extent). The two do not have the same policy options, powers, or stakeholders.

    Thirdly, economies are made up of complex things following both physical laws and inter-temporal beliefs over time. Contracts can be written over multiple time periods, demarcated with various metrics and conditions. One of these might be yen. They might be other currencies. As you shift the relative value of yen, not only does this effect all those things currently demarcated in yen, but it also effects the relative value of things demarcated in not-yen.

    There might be property, assets, metrics or just about anything else over time. Physical assets have an annoying property of being governed by physical laws, so no matter what you do with your currency, buildings fall apart as a function of their age, quality, materials and design. Roads get used, which need repairs which is a function of their total stock, their use, the environment, climate etc etc etc. Wages and population distribution is generally demarcated in yen (from a japanese perspective), but money, capital, assets, interest and population are not evenly distributed, so anything you do on a currency basis (operating through the machinery of banks and currencies) is going to have a different effect depending on all those things compared with targeted taxation policies (operating through the taxation machinery).

    As you implement your policy, the annoying humans in your political sphere (and those outside it, whom may nonetheless choose to contribute to your economy or not) are playing N-order games trying to predict where they think your policies (monetary or taxation) are headed so they can better place themselves to benefit in the future. They will adapt both BEFORE, DURING, and AFTER your policy intervention.

    I have, to keep this post short, left out little things like culture, politics, structural institutions and demographics.

    Many policies can be achieved through taxation and redistribution. Some policies can be achieved through macro-level tools like monetary policy (which in the lingo, we term as a relatively "blunt" instrument to achieve policy goals). Is printing and redistribution the same as taxation and redistribution. It can certainly have aspects which are similar. In a grand sense, you might say that all economic interventions are "just" taxation and redistribution, but personally, i think looking at things through a lens of taxation and redistribution is to limit oneself, and to miss the forest for the trees. After all, where does tax come into the cost of generating and maintaining a money supply in the first place? State, property, money and tax are not concepts that exist on their own, but are all inherently connected at all times.

    However, many policies wanted to be achieved cannot be achieved through any means. As machivelli (i recall) said, it is not uncommon for leaders to desire contradictions.
    Last edited by ACow; 04-15-2018 at 11:06 AM.

  5. #5
    आत्मन् Sappho's Avatar
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    Short answer: It's not what people do about money, it's about what money does to people.

  6. #6
    Member zago's Avatar
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    Gonna take some time to get to these. Thanks.

  7. #7
    Member zago's Avatar
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    Quote Originally Posted by ACow View Post
    I don't think I'm familiar with Yudkowsky, but the short answer is that no, its more complicated than that.

    In a simple model of the world, you might think that money is neutral and just adding another 3 zeros onto your money supply just adds another 3 zeros. And that simple model does explore a partial-truth that is important in knocking down a few low level policies: i.e. the classic grade-school question of "well if people are poor, why don't we just print and give them more money?"

    But the real world is far more complicated.

    Firstly, money doesn't just magically appear in the economy. It has to get their via some mechanical means. And while you may be at point A and want to get to a modeled goal of policy point B, what you actually have to do is go through intermediate points. And once you've gone through all the intermediate points and you hit point B, what then happens on the other side? Will that be affected by how to approached point B?
    Not sure I follow or see how this is relevant.

    Secondly, most economies and currencies are open: the bank of japan has controls on currency demarcated in yen (which is held and used by japanese citizens in the running of the japenese economy, but also to a point by external holders of the currency interacting with the economy from an external point of view). The government of japan (i'm presuming) controls taxation policies on the population within japan's borders or sphere of influence (and presumably, at the border to some extent). The two do not have the same policy options, powers, or stakeholders.
    That's an interesting point I hadn't thought of.

    Thirdly, economies are made up of complex things following both physical laws and inter-temporal beliefs over time. Contracts can be written over multiple time periods, demarcated with various metrics and conditions. One of these might be yen. They might be other currencies. As you shift the relative value of yen, not only does this effect all those things currently demarcated in yen, but it also effects the relative value of things demarcated in not-yen.

    There might be property, assets, metrics or just about anything else over time. Physical assets have an annoying property of being governed by physical laws, so no matter what you do with your currency, buildings fall apart as a function of their age, quality, materials and design. Roads get used, which need repairs which is a function of their total stock, their use, the environment, climate etc etc etc. Wages and population distribution is generally demarcated in yen (from a japanese perspective), but money, capital, assets, interest and population are not evenly distributed, so anything you do on a currency basis (operating through the machinery of banks and currencies) is going to have a different effect depending on all those things compared with targeted taxation policies (operating through the taxation machinery).

    As you implement your policy, the annoying humans in your political sphere (and those outside it, whom may nonetheless choose to contribute to your economy or not) are playing N-order games trying to predict where they think your policies (monetary or taxation) are headed so they can better place themselves to benefit in the future. They will adapt both BEFORE, DURING, and AFTER your policy intervention.

    I have, to keep this post short, left out little things like culture, politics, structural institutions and demographics.

    Many policies can be achieved through taxation and redistribution. Some policies can be achieved through macro-level tools like monetary policy (which in the lingo, we term as a relatively "blunt" instrument to achieve policy goals). Is printing and redistribution the same as taxation and redistribution. It can certainly have aspects which are similar. In a grand sense, you might say that all economic interventions are "just" taxation and redistribution, but personally, i think looking at things through a lens of taxation and redistribution is to limit oneself, and to miss the forest for the trees. After all, where does tax come into the cost of generating and maintaining a money supply in the first place? State, property, money and tax are not concepts that exist on their own, but are all inherently connected at all times.

    However, many policies wanted to be achieved cannot be achieved through any means. As machivelli (i recall) said, it is not uncommon for leaders to desire contradictions.
    The overall sense I get from this and the other replies it that it's all a bunch of ad hoc tinkering. I can't tell if there are really any fundamentals or if it's just a bunch of unconnected reactions to circumstances, or rules of thumb (which themselves can be complicated, but ultimately aren't based on any fundamental understanding).

    Or, it's all about achieving policy goals, not facilitating a comprehensible and predictable system of trade (which is how I see things). I take policy out of the equation because it seems to taint the pure economic understanding. Seeing the money supply as a tool to, say, increase employment seems to me like a way to mix everything up and sow chaos and distrust. Maybe that's putting it a bit strongly, but I think I and others feel like there is no making sense of money that way. It's not a system with rules. It's the whims of whoever is in control. At best they could use these tools effectively, but I still don't really like it because I don't see that much wrong with a straightforward, comprehensible system--a fixed currency. The problems that people bring up don't seem bad to me, namely deflation. Why should I be encouraged to spend or invest my money if I don't really need or want what I'm spending it on, or don't really understand what I'm investing in? This seems like a recipe for increasing wastefulness. If the value of my money goes up that's a good thing.

  8. #8
    Meae Musae Servus Hephaestus's Avatar
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    Try thinking of everything as money. I don't mean thinking of everything in terms of dollars. But I do mean everything.
    Most of time, when people ask why something terrible happened, they don't realize they are looking for someone to blame.

    --Meditations on Uncertainty Vol ξ(x)

  9. #9
    Now we know... Asteroids Champion ACow's Avatar
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    Quote Originally Posted by zago View Post
    Not sure I follow or see how this is relevant.
    Are you sure you're not already a macro-economist?

    Is there a particular bit you don't see, or disagree with? I view my response as very quickly covering two facets:

    a) GDP is a high level aggregate statistic: increasing money supply depends upon the real machinery of the economy and institutions. My main point there is both that GDP is not synonymous with the economy or the society, and that in the real world you have to take into consideration both the mechanics you have available to you and the effect that will have on the economy/society. That people might be thinking at this level (that is to say, at a higher resolution than described in GDP_ or have such considerations or limitations in practice seems quite pertinent to me to the question of "why mightn't the bank of japan just increase money supply to try to increase GDP".
    b) My second point tries to capture the complications we have as economists and social scientists of interacting on a complex system, while being within a complex system, and with multiple independent feed-back cycles and with forward looking actors. Point in time estimates like GDP can be manipulated in many ways. and boosting GDP in one period (or even a few periods) is not necessarily a desirable thing. In addition, through all of this you have the issue that you have independant actors working for and against you at all times, and must consider the effects of your policy intervention both before, during and after (how reliably or often this is done in practice is another,valid, question).

    The overall sense I get from this and the other replies it that it's all a bunch of ad hoc tinkering. I can't tell if there are really any fundamentals or if it's just a bunch of unconnected reactions to circumstances, or rules of thumb (which themselves can be complicated, but ultimately aren't based on any fundamental understanding).

    Or, it's all about achieving policy goals, not facilitating a comprehensible and predictable system of trade (which is how I see things). I take policy out of the equation because it seems to taint the pure economic understanding. Seeing the money supply as a tool to, say, increase employment seems to me like a way to mix everything up and sow chaos and distrust. Maybe that's putting it a bit strongly, but I think I and others feel like there is no making sense of money that way. It's not a system with rules. It's the whims of whoever is in control. At best they could use these tools effectively, but I still don't really like it because I don't see that much wrong with a straightforward, comprehensible system--a fixed currency. The problems that people bring up don't seem bad to me, namely deflation. Why should I be encouraged to spend or invest my money if I don't really need or want what I'm spending it on, or don't really understand what I'm investing in? This seems like a recipe for increasing wastefulness. If the value of my money goes up that's a good thing.
    Believe it or not, I think I get to an extent where you're coming from. Economics as a profession and subject matter has a certain love with math and internally consistent pure/abstract models, and maybe us, as INTP's have a further attachment to logical purity and consistency. And as I hinted up there in my earlier response to a general quantitative theory of printing money, some of those models are even very useful in context. But like Ptah struggling with his "man is rational (except for every fucking one I meet)" philosophy, at some point we have to ask ourselves are we really talking about a theory that applies to humans or a theory that we wish would apply to humans.

    My own subjective take on this is that at some level, past even graduate economics in some places, you have to realise there is no "pure economic understanding" beyond using "math and consistency as tools". Or at least not without accepting the reality of economics as a social science, rather than a mathematical one. That is to say, economics is a study of the actions and interactions of people and societies, with all their quirks, history and foibles. You may as well try to have a "pure theory of love" but extricated from "that whole people thing because people are weird, annoying, messy and adhoc".

    The "problem" with your fixed currency idea (to which I admit some emotional sympathy) is similarly that it is based on a false belief. A desire for independence, autonomy and objectivity.

    That false belief is simply this: "that currency can be dealt with as a concept independent of the people and society that use it".

    And two corollary rules that us INTP types will naturally find hard to accept:

    -People and society don't really care that much for independence, autonomy and objectivity.

    -Practically everything we have is not due to our own efforts, but due to integration and dependence upon our society. Humanity is hugely dependent on each other. A man considered alone does not have wealth, reason, money (to appreciate/depreciate), knowledge or investments. A man alone dies possessionless, hungry, cold and quickly.

  10. #10
    Senior Member Senseye's Avatar
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    I think the OP is referring to Elizier Yudkowsky who isn't an economist at all but rather a self taught AI researcher. He appears to like to comment/opine/philosophize about bureaucracies and systems and expected outcomes and the like so I assume at some point he was talking about Japanese fiscal policy, but I can't find any specific article about him and Japan.

    I'm thinking it is no surprise he might have some unorthodox views given his background.

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