I don’t understand what you mean. Are you just saying “the way I explained it is a quick way to communicate the sort of problem I have in mind”? Your mention of inflation confuses me because neither of us had mentioned it before.
I didn’t mean to say “the value of money = desire to hold it”, which I think would probably be wrong or ill specified. A price is the rate at which you can trade one good for another good. Money has lots of different prices (2$ per lb apples, $300 per oz gold etc., $50 per hour of massage etc.) since it participates in lots of different markets, whereas most goods only participate in one market (where they can be traded for money). You can talk about a “price level”, but coming up with a precise and useful definition is a little tricky.
I just meant that if for each agent, the marginal utility of money rises (or you add more agents) and the quantity of money does not rise then at equilibrium the price of money will have to rise across the board (deflation). I was saying that your example of economic growth leading to more transactions is a special case and trying to explain that broader framework.
There are many reasons why people’s general desire to hold money might rise or fall, for example if a checking mechanism is introduced then people will need to hold less money to conduct their transactions (reduced desire to hold money) or if there’s a global financial crisis, people might say “holy shit, I can’t trust any of these assets, I’d best just hold money” then people’s general desire to hold money would rise.
Sorry...you might want to see my edit, which I started before reading this response, and which basically (although less concisely) repeats your explanation about marginal utility of money rising for each agent.
I have totally confused the issue, and you are quite right.
That makes more sense to me. Have you heard of Monetary Disequilibrium theory? It’s the most reductionist approach to monetary economics, and what I was describing more or less.
Not by name, but it seems highly compatible with many other accounts of macroeconomic fluctuation.
As you may have gathered, macro is not my strongest suit. I mostly hopped on board an econ syllabus for other reasons, and now find myself with a whole bunch of useful and explanatory macroeconomic concepts that most other people have never heard of.
I don’t understand what you mean. Are you just saying “the way I explained it is a quick way to communicate the sort of problem I have in mind”? Your mention of inflation confuses me because neither of us had mentioned it before.
I didn’t mean to say “the value of money = desire to hold it”, which I think would probably be wrong or ill specified. A price is the rate at which you can trade one good for another good. Money has lots of different prices (2$ per lb apples, $300 per oz gold etc., $50 per hour of massage etc.) since it participates in lots of different markets, whereas most goods only participate in one market (where they can be traded for money). You can talk about a “price level”, but coming up with a precise and useful definition is a little tricky.
I just meant that if for each agent, the marginal utility of money rises (or you add more agents) and the quantity of money does not rise then at equilibrium the price of money will have to rise across the board (deflation). I was saying that your example of economic growth leading to more transactions is a special case and trying to explain that broader framework.
There are many reasons why people’s general desire to hold money might rise or fall, for example if a checking mechanism is introduced then people will need to hold less money to conduct their transactions (reduced desire to hold money) or if there’s a global financial crisis, people might say “holy shit, I can’t trust any of these assets, I’d best just hold money” then people’s general desire to hold money would rise.
Are we communicating better?
Also I categorised this as “inflation talk”, because it was wheeling out a few of the concepts behind the question “what are the causes of inflation?”
I think there’s something about macro that makes me communicate badly.
Sorry...you might want to see my edit, which I started before reading this response, and which basically (although less concisely) repeats your explanation about marginal utility of money rising for each agent.
I have totally confused the issue, and you are quite right.
That makes more sense to me. Have you heard of Monetary Disequilibrium theory? It’s the most reductionist approach to monetary economics, and what I was describing more or less.
Not by name, but it seems highly compatible with many other accounts of macroeconomic fluctuation.
As you may have gathered, macro is not my strongest suit. I mostly hopped on board an econ syllabus for other reasons, and now find myself with a whole bunch of useful and explanatory macroeconomic concepts that most other people have never heard of.