Thanks! This response makes a lot more sense to me than many of the other materials I’ve been able to find online (including the various Krugman pieces I’d found, and the debate between Summers and Kelton on Bloomberg). Appreciate the time you’ve taken to write it.
It’s still astonishing to me that we seem to have such an imperfect understanding of how monetary systems, which humans created, work. I guess it’s just a product of these being very complex systems, somewhat akin to a weather system. I’d be interested to see though how well the mainstream macroeconomic theories fare in terms of predictive power? That is, not with the benefit of hindsight, but whether from the outset the impact of different macroeconomic interventions can be reliably predicted by leading economists.
It’s also kind of interesting that so much rests on markets’ subjective expectations rather than the objective intervention undertaken. Seems like, if the government can satisfy markets that the present time is extraordinary, then they might get a free kick at printing extra money without paying the price in terms of inflation.
Thanks again. I’m going to try to keep learning more about all of this, as it’s pretty fascinating.
Thanks—appreciate the response and explanation. Always nice to get clear ‘Yes’/‘No’ response to a question!
To play the other side, isn’t the mainstream response you’ve described really strawmanning MMT though?
First, on the inflation point, as I note in the body of the main post, MMT still says that there is a point at which additional money cause inflation, because an economy is already at its then-current productive capacity and therefore the money does not stimulate further production. This would explain the Venezuala example.
This is also what I was referring to in the main post when I said that the IGM Chicago Survey doesn’t seem like it asks fair questions about MMT—e.g. the position put to various economists as representing MMT was that “Countries that borrow in their own currency can finance as much real government spending as they want by creating money”. On my read, that’s not a fair reflection of what MMT-advocates would say.
And isn’t it consistent with MMT’s theory re inflation that despite the massive quantitative easing programs during and after the GFC, including in the US and Japan, haven’t necessarily led to increased inflation as might have been predicted.
Or, to focus on the present example, given the amount of new capital being injected into the economy, is the mainstream expectation that we will see a spike in inflation soon? If we don’t, should that cause us to question the existing models?
Second, on the ‘capacity to borrow’ point, isn’t what’s happening now that the Federal Reserve is simply buying Treasury bonds? It seems to me like, if that can happen, there’s a captive market for Treasury bonds and perhaps no need to worry that you’ll fail to find a lender.
I appreciate that, from the sound of things, you know what you’re talking about when it comes to economics, so please don’t take the above questions as me trying to argue about something that I don’t understand. I recognise that I don’t fully understand this area and am asking these questions in the hope of getting a better grasp of it.
Thanks—I wasn’t aware of the Open Phil resource or those other readings. I’ll check them out.
Agree that macroeconomics is far from a neglected subject, but given the potential impact of these issues it feels like something that I at least would like to have a more solid understanding of and views about. It also seems plausible to me that the perspective of EAs might be slightly different that mainstream economists—e.g. due to the focus on longtermism and global, rather than national, welfare.
I’ll add a bibliography, including your reccomendations, but tbh my understanding has largely been informed by discussions with a friend who did their PhD in economic history. It’s a little hard to cite those discussions :)
Thanks Phil—appreciate the response! On #1, I think I get it though it’s a bit counterintuitive. I take it that the proposition is that permanent (or at least long-term) reduction in x-risk has a sort of ‘compounding’ impact on expected value, since it reduces risk each year, and therefore would compete with patient investing, but short-term reductions in risk don’t have that same ‘compounding’ benefit and therefore don’t compete in the same way with the interest rate (which is assumed to be increase with and therefore be higher than the x-risk rate). And #2 and #3, I think I follow too.
Some interesting ideas to think about… Looking forward to seeing your further work in this area.
I’m a bit late to the party here, but just listened to the episode. Really enjoyed it and found it thought provoking, so thanks to Phil Trammel and the 80k podcast.
I had a couple of questions, so here’s hoping Phil’s still monitoring this post! Or, if not, that someone else is happy to answer these questions.
First, there was section where I think it was suggested the x-risks can be treated as feeding straight into interest rates, such that the premium for investing still outweighs the benefits of spending now to try to reduce those x-risks. The example was given that even if x-risk is at 1% per year, it’s still better to invest over the long term. But the issue that came to mind was that, if x-risk is at 1% then the expected lifespan of humanity is just another ~68 years. And, the likelihood that there is anything around to spend on in the very long terms, say 300 years, becomes quite low; below 5%. I haven’t been able to work out how the math on this would look, but doesn’t that reduced expected lifespan of humanity outweigh the upside to be earned by compounding interest rates over the very long term?
Second, is it a problem (a reductio problem, I suppose) that the logic supporting investing over spending now would apply equally at any point in time. Such that, when considering the basic premise that investment returns are higher than present expenditure returns, there would in fact never be a time when spending is the optimal strategy. So, in 200 years, when this patient investment fund has grown very large, a group of rational people sitting down and deciding what to do will again decide to just keep investing and never spending?
Finally, there was some discussion to the effect that an advantage of investing is that our understanding of ethics is likely to keep developing, such that we will be in a better position to decide how funds can best be applied in the future. But this could equally mean that, down the track, we realise that the ethics of longtermism were flawed or much less persuasive than previously thought. If that’s the case, then a fund locked into patient philanthropy could be a big mistake, no?
Anyway, just wanted to share the thoughts I’d had in case anyone has good answers or is interested in discussing.
Thanks again for the podcast.
Putting aside any debate over the relative values you’ve assigned here, I think you might be making a error by the way that you try to translate relative moral harms into a dollar value, using the cost of extending a person’s life through donation to GiveWell’s charities.
To give an absurd example, the ‘harm’ caused if I were to punch a stranger in the face (assuming that I hurt them, but don’t otherwise cause any permanent damage) is a fraction of the harm caused if I were to take a year off that person’s life (which you have said can be valued at $100). Let’s say it’s at most 1/10th as bad as to punch someone in the face than to prematurely end their life.
However, even if I were to get more than $10 of enjoyment out of punching that person, I don’t think it’s right that I’m morally permitted to do so.
One reason is that although, at the margin, the cheapest available method for extending human lives by a year is $100, I don’t think that necessarily reflects the true value of a year of human life for these purposes. The price is likely to be a product of market inefficiencies (noting, for example, that in the developed world, people regularly spending many times that amount in order to extend life by a year). Also, I would certainly pay more than $100 to extend my life by year, and no doubt so would the person who is being punched. It just happens that GiveWell have identified some unusually efficient programs for extending human life. Those programs do not reflect the market price, at equilibrium, for a year of human life.
I’d like to put more thought into this, but I’m presently convinced you’re making a mistake with this move.
Secondly, I think that it’s wrong to come to the conclusion that something is not a ‘serious’ moral wrong, just because the harm caused is a fraction of the harm caused by ending a human life. Perhaps ending a human life prematurely is very high on the moral spectrum, such that something 1/100th as bad, as still quite a bad thing from a moral and utilitarian perspective.
Anyway, it’s a good debate to be having, even if I don’t reach the same conclusions you do.
(P.S. First post on EA forums, so apologies if I’m getting any etiquitte wrong or rehashing ideas that have previously been debated and resolved).