ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Sly dog! USD 100 is worth more if you win than USD 100 is worth if he wins.
I have taken the Bryan side in a similar bet with Pete Boettke. (The main difference is a shorter time period, which helps me.) The one issue we haven't been able to resolve, and will have to just act like trusting gentlemen about, is what happens if Obama or whoever pulls an August 1971 Nixon and imposes economy-wide wage and price controls. Any ideas?
Best,
David
Henderson,
I think in that case you should lose the bet because the most likely reason for such an outcome is an attempt to hold off inflation pressures.
Scott Sumner certainly makes a strong case that both of you will win these bets.
I accept. And for those thinking I missed something, let me clarify that I am fully aware of the fact that Bryan would be paying in depreciated dollars. This is offset by two factors:
(1) He is paying me earlier, so there's the time value of money to consider, and
(2) He will lose the bet so I'm not paying him any dollars.
Jsalvatier,
BTW, I prefer to be called David.
You're missing the point. When Nixon imposed price controls, inflation was well below 10%. We weren't betting on whether there would be inflation, but on whether inflation would be 10% or more.
Bob Murphy,
Can I have some of that action? I might want it structured a bit differently. Can we talk, as Joan Rivers says?
Best,
David
If you are looking at a year over year increase, why use SEASONALLY ADJUSTED CPI? Is there a multiple year trend in CPI that you are removing?
I really enjoy your method of handling economic disputes. It's a great bet for you to make as far as I can tell. The Fed added a nice tool to its arsenal to deal with inflation during the recession: paying interest on reserves. Sumner has already explained how contractionary this can be, and I believe it was meant to be so.
Amaturus,
When the Fed "deals with inflation" using a tool that expands the monetary base, does this not concern you?
JohnW, you'll have to talk to Bryan. I wanted to use non-seasonally adjusted but he needs the BLS to tell him what the data say. :)
BTW Bryan, can you either update in your post, or confirm down here in the comments, that we are talking about CPI for all urban consumers, all items. In other words, this is old-school CPI, not "core" CPI (which excludes food and energy). And we're not doing anything fancy like looking at the middle 80% or whatever the newfangled techniques are.
OK?
Nice Bryan - taking Hayek-groupies to task AND shutting down this hyperinflation nonsense. You've brought several smiles to my face lately.
BTW Bob Murphy - if you keep up with the comment section here, you've got a really bizarre view of the 1920-21 recession. What Keynesian advocates large fiscal stimulus with interest rates that high? Come on Murphy.
Good luck Bryan.
Bad bet in my estimation. We are talking about a 6 year time frame following one of the largest deflationary recessions in over a century. Thus you have to assume not only normal inflation, but also reflation.
That granted, double digit inflation is a rarity, even if we aren't talking CORE CPI. I have to think once assets start reflating again that energy prices are going to be bid up, and that could definitely boost inflation.
I definitely would abstain from a bet, on either side.
Shouldn't the bet be indexed to inflation?
@David R. Henderson:
David, I would take the position that neither party excluded government action to influence inflation rates, either positively or negatively. Government interaction in attempts to influence inflation are a given in this bet, its just that mandated wage and price controls are an extreme example of the possible action. Conversely (and possibly a libertarian's dream), the government could chose to let the market run free - the probability being significantly less likely than price controls, but still a possibility.
I'd also take Bryan's side of the bet, because I think that, in addition to my my concurrence with Bryan and David's beliefs about the economy, I think the Fed is more paranoid about inflation than any other issue. Once inflation started drifting north of 5%, more and more drastic steps would be taken to slow down the economy, or at least inflation.
100 dollars are minor; one million dollars would make it serious!