A hundred-dollar note is only worth anything if everyone believes in its worth. If people lose that faith, the value of a currency goes down and inflation goes up.
Ah, the condition for the reality of money is much weaker though—you only have to believe that you will be able to find “someone” who believes they can find someone for whom money will be worth something, no need to involve “everyone” in one’s reasoning.
Inflation is much more complicated of course, but in essence, you only have to believe that other people believe that money is losing value and will buy the same thing for higher price from you to be incentivized to increase prices, you don’t have to believe that you yourself will be able to buy less from your suppliers, increasing the price for higher profits is a totally valid reason for doing so.
This is also a kind of “coordination by common knowledge”, but the parties involved don’t have to share the same “knowledge” per se—consumers might believe “prices are higher because of inflation” while retailers might belive “we can make prices higher because people believe in inflation”...
Not sure myself whether search for coordination by common knowledge incentivizes deceptive alignment “by default” (having an exponentially larger basin) or if some reachable policy can incentivize true aligmnent 🤷
Ah, the condition for the reality of money is much weaker though—you only have to believe that you will be able to find “someone” who believes they can find someone for whom money will be worth something, no need to involve “everyone” in one’s reasoning.
Inflation is much more complicated of course, but in essence, you only have to believe that other people believe that money is losing value and will buy the same thing for higher price from you to be incentivized to increase prices, you don’t have to believe that you yourself will be able to buy less from your suppliers, increasing the price for higher profits is a totally valid reason for doing so.
This is also a kind of “coordination by common knowledge”, but the parties involved don’t have to share the same “knowledge” per se—consumers might believe “prices are higher because of inflation” while retailers might belive “we can make prices higher because people believe in inflation”...
Not sure myself whether search for coordination by common knowledge incentivizes deceptive alignment “by default” (having an exponentially larger basin) or if some reachable policy can incentivize true aligmnent 🤷
Yes, thanks for the clarification! I was indeed oversimplifying a bit.