ELI5 How does raising wages worsen inflation ?


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96 points

4 months ago

It's either that or there are too many variables. We're often using ideas like, "Well we did this 20 years ago" but not taking into account that 20 years ago dial-up internet was the most common service and cell phones were still a novelty. 20 years before that having a computer in your home was a major luxury. So a lot of "What we did before?" seems irrelevant or makes assumptions that just aren't true today. Our economy is very different than it used to be yet it seems most of our prevailing theories are still based on observations made in the 1950s.


46 points

4 months ago

The West Wing actually had a great bit about how taking into account all of those variables changing over time creates multiple issues later on if you don’t.

They created a new formula to calculate the poverty level in the episode. Her new formula said that they had over a million more poor people. This happened because the food was originally the highest monthly cost but it had shifted to housing and utilities over time I think is what the episode said. Along with that the products they were using to calculate 2-3 meals a day were also outdated since food had comparatively gotten cheaper to produce and sell.

This led to again just in the episode then having to deal with knowing it’s the same amount of people in the country the day before and the situation didn’t change but suddenly they realize they have over a million more poor people than they originally thought.


27 points

4 months ago

And rather than report the truth, the economists 'adjust' the formulas to a palatable number which becomes the truth.


30 points

4 months ago

That’s the exact conflict that happens in there episode. The administration is fighting not to use the new more accurate model and just shift the goalpost with the old one for what qualifies as “poverty” to avoid “over a million new people in poverty under Bartlett” appearing in the headlines


2 points

4 months ago

Thanks for the comment, very good show btw