Inflation vs. Unemployment

[Nym90]

Agree is conservative, disagree is liberal.

[The Duke]

Agree, though I don't think that controlling one is exclusive to controlling the other.  We've seen the ravages inflation can wreck on wages.

[Aegir]

Agree slightly

[IDS Judicial Overlord John Dibble]

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.

[Grad Students are the Worst]

Disagree. Both are pretty much equally important.

[Nation]

Control inflation for the most part, so we don't have to deal with controlling unemployment.

[12th Doctor]

Agree.  If inflation snowballs out of control, the entire economy is wrecked.  Example: post WWI Germany.  That is the most extreme case, but the 1970's in America is another less extreme example.

[Sibboleth]

Strongly Disagree

I remember the '80's

[Redefeatbush04]

Agree

[nclib]

Strongly disagree.

Unemployment has a more direct impact on individuals and therefore should be controlled.

[muon2]

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.

Unfortunately, the rule you leaned is clasical Keynesian economics. It has been shown to have exceptions in modern economies, particularly in the 1970's. See for example stagflation.

[IDS Judicial Overlord John Dibble]

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.

Unfortunately, the rule you leaned is clasical Keynesian economics. It has been shown to have exceptions in modern economies, particularly in the 1970's. See for example stagflation.

Well, I did forget to mention that the rule only applies in the short term. No economic rule is perfect anyways, they are very general, and can't account for all factors.

[A18]

Disagree. Both are pretty much equally important.

Same here

[Nym90]

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.

Unfortunately, the rule you leaned is clasical Keynesian economics. It has been shown to have exceptions in modern economies, particularly in the 1970's. See for example stagflation.

Well, I did forget to mention that the rule only applies in the short term. No economic rule is perfect anyways, they are very general, and can't account for all factors.

Or, conversely, the 1990's, in which inflation and unemployment were both low.

The key is keeping the economy running at maximum productivity. Unemployment is thus bad, because it represents inefficiency in the economy; every person who doesn't have a job is someone who is not contributing, but yet they still must consume resources in order to survive. Consumption has to be met by productivity.

Clearly run away inflation is a bad thing, but as long as everyone is working in a job in which they are producing either a valuable good or providing a valuable service, and are being compensated fairly for it, it will be kept in check. The key is to ensure that consumption and production of goods is kept in balance.

[Prospero]

Unemployment is not something that ought to be "controlled" as it will take care of itself naturally through an unfettered free market.  Inflation can be avoided through a return to a gold standard.

[Mikem]

Strongly Agree.  Unemployment is not for us to control as mentioned above.  The market will take care of that.  If we start placing people in jobs (or dictating wages through minimum) which are not ready to be born by the market then we will be loosing productivity and raising the costs of goods, hence inflation.  This comes from a strong belief in market economics, free trade, and the idea that it is not the governments job or business to give anyone anything, only to protect them and take care of macro issues such as monetary policy.

As far as the 90's go, I believe the late boom part of the decade was nothing more than an economic anomoly.  The gains made there were not sustainable, and were mainly caused by superoptimism and speculation.  The market realized this in the last days of the millenium and corrected itself, hence the recession that ensued.

Also, I do not believe that everyone SHOULD be employed for that matter.  I'm sorry to say that some people are just too unskilled, unproductive, or just plain lazy to make give utility to an employer.  We cant just go around giving everyone a shovel and telling them to dig and they'll get paid as well as anyone else, thats command economics not capitalism.  Next thing we would be standing in line for toilet paper

[Free Trade is managed by the invisible hand.]

Agree. There is a simple rule I learned in economics class: The higher inflation is the lower unemployement will be, the lower inflation is the higher unemployment will be. We don't want too much of either, but given the choice I would prefer to control inflation, as high inflation ultimately does far more damage to the economy in the long term.

Unfortunately, the rule you leaned is clasical Keynesian economics. It has been shown to have exceptions in modern economies, particularly in the 1970's. See for example stagflation.

Well, I did forget to mention that the rule only applies in the short term. No economic rule is perfect anyways, they are very general, and can't account for all factors.

Or, conversely, the 1990's, in which inflation and unemployment were both low.

The key is keeping the economy running at maximum productivity. Unemployment is thus bad, because it represents inefficiency in the economy; every person who doesn't have a job is someone who is not contributing, but yet they still must consume resources in order to survive. Consumption has to be met by productivity.

Clearly run away inflation is a bad thing, but as long as everyone is working in a job in which they are producing either a valuable good or providing a valuable service, and are being compensated fairly for it, it will be kept in check. The key is to ensure that consumption and production of goods is kept in balance.

The fundamentals of macroeconomics teach us that inflation is not a problem unless it is unexpected, and secondly how can a thread discussing inflation not start out by discussing cost-push inflation model?

[dialectical fetishist]

Strongly disagree. Unemployment is a massive social problem and fixing it should be a top priority.

[Senator Libertas]

The question posed here presents a false dichotomy.

[Free Trade is managed by the invisible hand.]

The question posed here presents a false dichotomy.

obviously but it is something the Federal Reserve seriously considers. Probably because they have no clue what cost push inflation is!

[Bo]

Strongly agree. If you handle inflation first, then unemployment can be handled afterwards without raising ifnlation too much. However, if you tackle unemployment first, then inflation will still be high and then once you tackle inflation, unemployment will go up and you will need to tackle unemployment a second time. Thus, tackling inflation first is much easier and much more beneficial. Just look at the example of Paul Volcker in 1979-1983.

[opebo]

What an old poll - wish I could change my vote on this one!

[Free Trade is managed by the invisible hand.]

What an old poll - wish I could change my vote on this one!

how did you vote and why?

This thread does not consider cost push inflation, and i am assuming it is only talking about price inflation, but not any other kind of inflation.

[opebo]

What an old poll - wish I could change my vote on this one!

how did you vote and why?

This thread does not consider cost push inflation, and i am assuming it is only talking about price inflation, but not any other kind of inflation.

I voted in favor of prioritizing inflation as compared to unemployment, as at the time I was a right-winger.

But yes, few people understand that the inflation of the 70 through early 80s was not in fact any kind of indictment of Keynesian-ism, nor an effective argument for neo-liberalism, but rather just a supply shock.

[Free Trade is managed by the invisible hand.]

What an old poll - wish I could change my vote on this one!

how did you vote and why?

This thread does not consider cost push inflation, and i am assuming it is only talking about price inflation, but not any other kind of inflation.

I voted in favor of prioritizing inflation as compared to unemployment, as at the time I was a right-winger.

But yes, few people understand that the inflation of the 70 through early 80s was not in fact any kind of indictment of Keynesian-ism, nor an effective argument for neo-liberalism, but rather just a supply shock.

maybe you should post more in this forum about inflation. Their are a lot of misconceptions about it. For example my father comes from the generation that had to deal with supply shocks, and thus until this economic crisis he had an inherent disagreement with inflation.