Friday, May 9, 2008

Up The Down Escalator (Infation, Deflation and Mom)

From Cassandra does Tokyo:
...Do you think The People are less discontented under an inflationary regime or a deflationary regime?
To get the discussion going, I will put to you that under an inflationary regime the vast majority of the people suffer from Hamster Syndrome whereby they are running inside the wheel faster and faster but never getting anywhere, or worse from "Up the Down-Escalator Dilemma" (Do you remember the Chameleons?) where it feels like (or IS) almost impossible to make any headway in the direction one desires. This is because real wages are falling whether people consciously know it, and income inequality and Gini's are growing. On the other hand, unemployment IS [temporarily?!?] lower than it otherwise would be, which is a high-intensity diminishing of the downside to those that otherwise wouldn't be employed. In sum, most people feel worse off with low intensity, whereas a few people feel better off with high intensity.

Under a deflationary regime by comparison, I will put to you that the vast majority of people don't feel as worse-off as they would under an inflationary regime, since real wages tend to be more stable, and income inequality and Gini's tend towards diminishment making one feel less worse off(relatively speaking) - and importantly it is the relative that counts most in human behaviour with respect to contentedness. However, the downside is that unemployment tends to be higher than otherwise would prevail under an inflationary regime, and so a smaller minority percentage of the workforce feels [rightly] to be worse-off and feels so with a high intensity....MORE