Re: More money or better distribution?

["John B. O'Donnell" <jackodonnell@xxxxxxxx>]

Paul Davidson wrote:

> jbod wrote
<<SNIP>>
> >In order to separate the effects let us examine the probable
> >consequences of three possible actions:
> >(1) Create and distribute previously non existent money [PNEM] to a
> >group of people with an above average propensity to consume. [Assumed to
> >also be predominantly those with less than average wealth.]
> >(2) Distribute the same amount of PNEM to a group of people with an
> >above average propensity to save. [Assumed to be predominantly those
> >with more than the average amount of wealth.]
> >(3) Distribute the same amount of PNEM in proportion to each person's
> >holdings of wealth.
> >
> >Given these conditions, if it is true that increasing the money supply
> >contributes to economic growth independent of any associated change in
> >the distribution of wealth then there would be no difference in the
> >effect of each of these choices. However, if the outcome is determined

REINSERTED from my earlier post --
IAW Keynes propensity arguments and not by the increase in money
quantity then case (1) would produce an economic improvement; case (2)
would produce a degradation; and case (3) would have no effect. Also,
there appears to be no need to resort to separation of the actions in
the time domain of long and short term.

I suggest that it is the action of redistribution of wealth usually
associated with increases in money supply and not the increase itself
that that gives the appearance of increase in economic activity
sometimes associated increases in economic activity. Further, this
mental experiment also explains the occurrence of "stagflation" that
sometimes accompanies an increase in money supply.

Any of the proponents of increasing the money supply as a method of
"stimulating" an economy willing to address / refute this little
experiment?
END REINSERTION

> The trouble with your illustration is that it attempts to be a "when did
> you stop beating your wife" question.

Perhaps you can identify (1) the beating and (2) the wife in your
application of metaphor to this simple set of conditions and asserted
expectation of consequences.

> Even worse, however, since you
> ASSUME PNEQ

I make no such assumption. Assume any state of PNEQ you chose, just
assign any changes caused by those assumptions to those changes and not
to the change in money supply.

>--then you are dropping this money into the economy from a
> helicopter, i.e., an exogenous money supply whichhas no effect on either
> interest rates of the marginal efficiency of capital.

Change interest rates, the marginal efficiency of capital or any other
variable you want. Just isolate the effect of those changes and
attribute them to the complexities you prefer to introduce and not the
increase in money supply. Also, if you prefer, consider the increase in
money supply to be introduced any way you like and, since you may not be
certain who benefits [i.e. -- The very problem of using money supply as
the method to achieve a higher propensity to consume.] from that
introduction of additional money, change the possible outcomes of
distribution of wealth changes from introducing the additional money
supply as: (1) a net increase in the propensity to consume; (2) a net
increase in the propensity to save; or, (3) no change in either
propensity.

> Inhj fact you are
> implicitly assuming all spending is consumption and is strictly a function
> of wealth

Do the above changes in the conditions remove the implicits you find
bothersome and your complaints of the "beating your wife" attributes of
the proposition? If not, will you suggest what the conditions need be to
remove your suggestion that I am an "intransigent zealot" [or some
equivalent phrase] as you called me some time ago.

> W \hen you understand the concpet of an endogeneous oney expanding to meet
> the increased needs of trade you will understand why dQ/dN does not equal
> trade -- and why if the banking system does not expand to meet the
> increased neds of trade , that is if dM=0, then DQ will be constrained to
> zero.

And when you set aside your silly assertions and open your elitist eyes
to simple argument perhaps you will actually learn that superfluous
nonsense does not answer direct questions.

> Case closed.


Case not even opened.

			-- jbod

		Tax Privilege, Not People
___________________________________________________
Come visit and see a new economic perspective --
       http://www.geocities.com/CapitolHill/1067
           Comments/arguments welcome.
..