Saturday, March 23, 2013

Apologies for absence

The combination of the Melbourne heatwave, being very busy at work (having to get up a 5.30am in the morning to beat the traffic then doing a full day's presentation teaching takes it out of me) and an obsessive writing project have meant I have not been around much.  Apologies for that. When I have been, it has mainly to fill the spam bin.  In the war between spammers and spam-blockers, the spammers are clearly currently ahead. Apparently, praising one's format/choice of blogging platform/blogging content is part of the successful spammer's armoury.

I did manage to get to see Lincoln, which I enjoyed immensely. Intelligent films about politics, such as this Daniel Day Lewis vehicle, is a form of cinematic crafting that I particularly enjoy. At least one professor of American history has announced he is going to use it as a teaching aid, which seems entirely reasonable.

Lincoln manages to be at once uplifting about the possibilities of politics and wryly cynical about its processes. The Thirteenth Amendment is portrayed as being (narrowly) passed by a mixture of base political manouevring, blatant use of the patronage powers of the Presidency and simple persuasion. (I was also amused that Hollywood did a movie where the Republicans were the good guys and Democrats the bad guys.) Democracy as government by discussion is well on display.

But even the most blatant vote-buying displayed for our cinematic enjoyment is for the noblest of purposes--abolishing slavery, definitively and without evasion. That it was nearly de-railed by another worthy cause--ending the bloodiest war in American history--is also part of the stuff of politics, which is rarely a competition between good and evil but often one between rival goods. (And occasionally one between rival evils; that is the enormous tragedy of the Eastern Front during the Dictators' War.)

As Legal Eagle recently pointed out, serious blogging is a time-consuming activity. It also takes energy and cognitive effort. Lacking spare amounts of the former and having the latter very focused on a specific writing task has left me little time for blogging. I am hopeful that the onset of the school holidays will see a bit more time for the latter. But writing will (hopefully) being taking up more of my time than it has, so no strong promises are being entered into.

Sunday, March 17, 2013

The problem with saying money is "tight" or "loose"

This is based on a comment I made here in response to a post which talks about recessions as monetary phenomenon (which I agree with). It is the terminology of money being "tight" or "loose" I have some problems with.

Money matters because, in a monetary exchange economy, almost all transactions are mediated by money. (Hence the demand for goods and services is the "supply" of money circulating in the economy.) So, everyone cares (at least to some extent) about their money income and the expected future swap values of (their) money. (In a monetary exchange economy, goods and services have prices, money has swap values; it keeps the terminology, and so thinking, clearer.) Something everyone in an economy cares about is going to matter a lot more than something only some folk care about.

If people have expectations that the money is going to significantly lose value, obviously they have an incentive to spend sooner rather than later. This will be an economy-wide tendency that will tend to drive up money incomes. If they think it is going to significantly gain value, clearly they have an incentive to spend later rather than sooner. This will be an economy-wide tendency that will tend to drive down money incomes.

If they expect it to retain value reasonably well, then it all turns on their future expectations about money income. If they have poor expectations, that creates an incentive to hold money. If those expectations are limited to a particular industry, then folk will tend to exit the industry and other industries will not have to bid quite so high for resources, stimulating them. If these expectations are general, then the tendency to hold money will tend to drive down money incomes. (Which comes back to something everyone cares about matters a lot more than something only some folk care about.)

The trouble with the "loose" and "tight" terminology is the two axes problem--do you mean that money will tend to lose/gain value, or do you mean that people have poor expectations of future income, or some combination of the two?  Presumably "disastrously tight" means gain swap value plus poor income expectations. And sure, "ugly" deflation means that, but there is a certain amount of chicken-and-egg problem here since each will cause the other. So the two axes are not causally independent.

Worse, you can have serious supply issues for goods and services as well as money, so poor income expectations AND falling swap values. (We could call this case "Greece": I have limited sympathy for a country which is still paying lots of people to get in the way of folk transacting and then complains about a shortage of transactions.) So we cannot even say they are simply causally interdependent.

Perhaps better terminology is needed?