Re: Tire Inflation and Economic Inflation.

["ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

Harry's tire inflation analogy to economic inflation is an interesting parable.
Within the limits of simplification inherent in all parables, it is a useful
imagery for discussing inflation.

Using Harry's image, maintaining the proper tire inflation pressure is not quite
as difficult as determining the proper pressure.  With tubeless radial tire (state
of technology comparable to that of different economies, agricultural, industrial,
informational. etc) the optimum pressure is 28psi.  This optimum is a balanced
trade off between mileage, road holding ability at high speed, breaking traction,
riding comfort, shock absorber life span, tire wear, etc.  Some drivers opt for
30psi or even 32psi because they place premium value on mileage.  One of course
must measure tire pressure after the tire has been traveling at high speed for
considerable time when high speed tire temperature has been reached.  The day will
come when every tire is equipped with an automatic pressure adjustment device
controlled by sensors fed from an pressurized inner tube in a tubeless
configuration.

In managing monetary policy, the proper inflation rate is not a natural
occurrence.  It is a value driven decision, the impact of which is scientifically
analyzed but the choice  among available options is always ideological framed.  It
is obvious that 1.5% inflation rate comes with high dislocational penalties in the
economy that are concentrated on certain sectors.

In campus planning, a field that I had considerable experience in my younger days
as an architect, there are always one or two trustees who are fixated on raising
the low utilization factors of classrooms.  The solution to that inefficiency is
to schedule more classes before 8 am, at noon and after 4 pm.  But the penalty for
that schedule is to create unhappiness among faculty members and students to is
not conducive to a quality learning experience.  My parable to these trustees was
that they should be thankful that the bathrooms is their houses has a low
utilization factor, for the cure for that is diarrhea.

Henry C.K. Liu

Harry Veeder wrote:

> ----------
> >From: "??¡Á?EUR? Henry C.K.Liu  EUR??l¡Â?" <hliu@xxxxxxxxxxxxxx>
> >To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
> >Subject: Re: investment and unemployment
> >Date: Tue, Apr 11, 2000, 2:27 am
> >
>
> >
> >
> >GGard97342@xxxxxx wrote:
> >
> >> I make no apologies for regarding the first duty of a government to be to
> >> prevent deflation.
> >
> >This seems to me to be a very sound statement.
>
> No, it is unsound, because I think it is partly based on the
> on the mistaken (Keynesian ?) belief that the economy cannot ever
> naturally inflate without government intervention.
> Deflation is either a natural process or the result of deflationary
> operations.
> Reflation is the result reflationary operations. I am not aware
> of any special name for a natural process that increases inflation.
> Reflation  is the opposite of deflation. Reflationary and deflationary
> operations counter naturally occurring deflation and inflation
> respectively.
>
> >One only wishes that the Fed feels the same way.
> >Unfortunately, the Fed has always considered it its sacred duty only to fight
> >inflation.
>
> The fed or monetary arm of the government
> has a duty to fight a natural upward trend in inflation.
> However, it should back off when the trend reverses.
> The fiscal arm of the government should fight natural
> downward trends in inflation, but it should back off when
> that trend reverses.
>
> If the fed over shoots the mark then the fiscal arm
> should intervene by ordering the fed to back off.
> Like wise the fed has a duty to order the fiscal arm to back
> off if it over shoots the mark.
>
> The "laws" for tire inflation work in the same way.
> The right (fiscal) arm reflates the tire using the air pump
> while the left (fed) arm deflates the tire by pressing
> on the value.
>
> Proper management of tire inflation requires an ability
> to understand, recognize, measure and calculate the
> differences between natural inflation/deflation
> (due to energy/temperature fluctuations and/or leaks) and
> that due to deliberate reflationary/deflationary
> operations.
>
> Harry Veeder