Those who wish for deflation should think through what it means.

November 24, 2015 4:39 PM

Nick Rowe is a Canadian macroeconomist at Carleton University. He's the most prolific of several bloggers at Worthwhile Canadian Initiative, a group (mostly macro) economics blog. He often writes on, often colorful, (for a macroeconomist) thought experiments and analyses probing intuitive understandings of 'money,' and generally on the topic of exactly what money and monetary policy are: Is money a liability? Was Milton Friedman a crypto-communist? Can we actually avoid helicopter money? Could we have an economy with negatively valued money? How many markets are there? And of course, what if Chuck Norris was a central banker? He also writes on the nominal GDP level targeting, mentioned previously.
posted by PMdixon (26 comments total)

While WCI and Rowe have been linked before, neither's been the subject of a post. I believe I managed not to link to any individual pieces that kliuless already has.
posted by PMdixon at 4:40 PM on November 24, 2015 [1 favorite]

Great post, thanks. There are some excellent non-macro posts in the WCI archives too, these are two that I've found very educational:

The basic arithmetic of RRSPs and TFSAs, by Frances Wooley. Miles ahead of the oft-misleading RRSP and TFSA explainers that tend to pop up in newspapers around tax season.

Why the GST is a good idea, by Stephen Gordon. Working through this example helped me (finally) understand why economists tend to prefer consumption taxes.
posted by ripley_ at 5:21 PM on November 24, 2015 [1 favorite]

"Why the GST is a good idea" informs us that the GST increases the rate of return for investors. Of course, as a flat tax it is also much better for the rich than a progressive income tax. Win-win, why would anyone who matters be opposed?
posted by justsomebodythatyouusedtoknow at 5:34 PM on November 24, 2015 [15 favorites]

I can't say as I'm at all impressed with a defense of the GST that completely ignores the distinction between progressive and regressive taxes.
posted by Proofs and Refutations at 5:38 PM on November 24, 2015 [3 favorites]

^You two might enjoy this reprise of that post then:

we can correct for that using targeted transfers to low-income households so that they aren't worse off; that's what the GST rebate is for

Or this post (linked to in "Why the GST is a good idea") on how Nordic countries tend to finance high social spending with consumption taxes, including a slide that specifically addresses concerns about consumption taxes being regressive.
posted by ripley_ at 5:49 PM on November 24, 2015 [2 favorites]

I've been reading a very interesting book about economics, Toward a Truly Free Market by John C. Medaille (which I'd love to see a good critique of) which argues that it's best to tax the things you don't want more of, so we should be primarily taxing rents (any income that comes from owning a thing rather than making or doing or improving a thing, "wealth without work" as he calls it) and externalities (pollution, the subsidized transportation that allows Wal-Mart and Amazon to undercut local businesses, etc).
posted by straight at 6:06 PM on November 24, 2015 [16 favorites]

I did a retail model for Canada a few years back and used the presence and proximity to a Tim Horton's as a set of economic variables. It was one of the best predictors in my model. So this is totally up my alley.
posted by Nanukthedog at 6:22 PM on November 24, 2015 [2 favorites]

Wouldn't presence of a Timmie's just read as a constant? I mean, they're fucking everywhere. I got up this morning, and there was one on my front lawn.
posted by TheWhiteSkull at 6:27 PM on November 24, 2015 [13 favorites]

What did Timmy proximity predict?
posted by justsomebodythatyouusedtoknow at 6:29 PM on November 24, 2015

What did Timmy proximity predict?

that you are in fact in Canada
posted by philip-random at 6:32 PM on November 24, 2015 [21 favorites]

I highly recommend the green money/red money loose series of posts, riffing on Samuelson 1958.
posted by PMdixon at 6:33 PM on November 24, 2015

we can correct for that using targeted transfers to low-income households so that they aren't worse off; that's what the GST rebate is for

these days, housing, education, and healthcare are our dominant -- 80% -- expenses.

everything else is noise, for most people.

30 years ago a decent PC was ~$2500 and rents were ~$600/mo in West LA.

Now a PC costs $600 and a 1B costs $2500/mo. We need a Moore's Law for housing.

https://research.stlouisfed.org/fred2/graph/?g=2Fwc shows how housing & healthcare have gone from 25% of wages 50 years ago to 50%+ today.
posted by Heywood Mogroot III at 7:09 PM on November 24, 2015 [11 favorites]

Now a PC costs $600 and a 1B costs $2500/mo. We need a Moore's Law for housing.

https://research.stlouisfed.org/fred2/graph/?g=2Fwc shows how housing & healthcare have gone from 25% of wages 50 years ago to 50%+ today.

I think we are being hurt on both counts, yes?
- On the numerator side: Housing and healthcare costs have gone up, as you've pointed out.
- On the denominator side: Both nominal and real wages have stagnated or decreased.

The net effect is a horrific increase in costs as a percentage of wages, as illustrated in the graph.
posted by cynical pinnacle at 7:19 PM on November 24, 2015 [2 favorites]

so we should be primarily taxing rents (any income that comes from owning a thing rather than making or doing or improving a thing, "wealth without work" as he calls it)

Ending this means ending capitalism. like of course that's what I'd say here, but it's true: the institution of wealth without work is the heart and soul of capitalism. it's how you get rich: you make enough money to live off the capital gains while continually ploughing as much of those capital gains as possible back into the market, yielding a continually increasing amount of money forever or until the revolution comes (which is to say, forever).

I am absolutely for any and all measures to accomplish the taxation into obliteration of capital. However, I have no real say in the matter legislatively, because capital has ensured that our legislatures will always protect capital. And "capital" and "wealth without work" are synonyms.
posted by You Can't Tip a Buick at 7:33 PM on November 24, 2015 [9 favorites]

Ending this means ending capitalism

There's actually two kinds of capitalism, one involved in creating new wealth for returns, and the parasitical kind devoted to capturing existing wealth for returns.

We can tax them separately, but if you believe Mason Gaffney, a Georgist economist formerly teaching at UC Riverside, the parasites made some wise investments in economics 100-odd years ago to defend their position by hiding themselves in with the former group.

http://www.progress.org/article/the-corruption-of-economics
posted by Heywood Mogroot III at 7:57 PM on November 24, 2015 [4 favorites]

So the quantity and distance of a Tim Horton's to the first three characters of the postal code (the last 3 designate the specific milk run or route in CA) was directly related to the retail draw of an area. The one obvious exception to the model - and one which I wish I had the sales figures for Tim Horton's of course - was Yellow Knife. Until I modeled this I never knew about Yellow Knife and particularly of how much of a draw the Tim Horton's there was... but, afterwards - wow... just a great piece of insight.

For those of you in the US who are unfamiliar with Tim Hortons: imagine Waffle House, IHOP, and Dunkin Donuts all had a baby and the baby played professional hockey...
posted by Nanukthedog at 8:17 PM on November 24, 2015 [2 favorites]

There's actually two kinds of capitalism, one involved in creating new wealth for returns, and the parasitical kind devoted to capturing existing wealth for returns.

Yeah, Medaille draws a sharp distinction between capital that's "working," making things, employing people vs. capital (mostly land) that's just sitting there demanding rent.
posted by straight at 8:53 PM on November 24, 2015

Hmm I wasn't really impressed with that gst defence, relying on the oversimplistic canard that income taxes disincentivise work, and that transfers to address inequality are both practicable and cost free or low cost. Very weak, neoliberalism 101 stuff. It's much more complex than that.
posted by smoke at 10:11 PM on November 24, 2015 [2 favorites]

income taxes disincentivise work

I mean, they couldn't do a much better job of disincentivizing work than work itself does. Fuck that stuff.
posted by Steely-eyed Missile Man at 10:52 PM on November 24, 2015 [13 favorites]

A priori, anonymity appears hard in the red world, which makes it fascist. I'll need to think if blind signing can be used to create a red currency that's anonymous for customers but not merchants though.
posted by jeffburdges at 5:29 AM on November 25, 2015 [1 favorite]

income taxes disincentivise work

this assumes that how much one works is actually related to one's wage.

having worked minimum wage and higher paid jobs recently: hahahahahahahaha.

For the vast majority of us, work is incentivised by rent and food. In North America, mostly by rent (I could probably feed myself off my savings for a year or two, but don't have next month's rent).
posted by jb at 5:42 AM on November 25, 2015

There are different curves for how pay incentivises work for different people. Many people work 40 hrs no matter what and pay differences are a motive to switch jobs or demand raises. The curves are different depending on whether the goal is survival, security, comfort, or wealth. Past a certain point the curve is negative and some people will work less if they're paid more (people dont usually take a second job if the first one pays enough).
posted by straight at 5:51 AM on November 25, 2015 [1 favorite]

Ain't seeing any viable red currencies based on blind signing per set, but you can make the blind signed tokens green of course. Yes that block chain stupidity still works, but it's only pseudononymous.
posted by jeffburdges at 5:56 AM on November 25, 2015

Wouldn't presence of a Timmie's just read as a constant? I mean, they're fucking everywhere. I got up this morning, and there was one on my front lawn.

I did a quick Timmie's census in my neighborhood in Ottawa.

There's one at:

Bank St and Cooper St.
Bank St and Gloucester St.
Bank St and Laurier Ave.
Metcalfe and Laurier Ave.
Metcalfe and Sparks
Metcalfe and Slater
O'Connor St. and Slater St.
Queen and Lyon St.
Somerset and Lyon St.

So nine Timmie's within a ~5 block radius.
posted by storybored at 6:36 PM on November 25, 2015

Ahem: Yellowknife is one word.
posted by klanawa at 10:16 PM on November 25, 2015

I believe I managed not to link to any individual pieces that kliuless already has.

i claim no possession :P

the nick rowe piece that fell into place for me was his explanation of macroeconomic identities: "A couple of years back I decided that MV=PY is a more useful identity (though it should really be MV=PT)... Recessions are not about Y; they are about T. Production of newly-produced goods Y for home use and for barter with friends and neighbours seems to do very well in recessions; while monetary transactions T of all kinds, whether for newly-produced goods or not, seem to do badly." (emphasis added!)

and with a click, those few sentences reordered my worldview; placing the economy in such a narrow band like that opened my eyes to the spectrum so to speak. when speaking about growth and productivity for example, say wrt secular stagnation, all economists, finance people and policymakers are generally seeing and concerned about are monetary transactions, because it's what's measured; that's their (limited) reality.

i'm no mathematician (far from it!) but to me it was maybe somewhat akin to discovering negative numbers (or maybe if i was smarter, imaginary numbers, quaternions and octonions ;) or maybe i'm just naive?

also btw, fwiw, other pieces that i've really liked are his -- well milton friedman's -- analogy of (fiat) money with daylight savings time and more recently his critique, if not demolition, of neo-fisherianism through tatonnement... tatonnement, what? 'groping' towards the answer :) thanks nick rowe for helping, you're awesome!
posted by kliuless at 6:19 PM on December 11, 2015 [1 favorite]