Friday, August 27, 2010

Yglesias bashing anyone?

"'deflation' means a decrease in the price level", he says.

Price is the comparison of inventory variances between a lightweight good and a heavier good. To be consistent, I should use variance to the square of inventory average, Noise to Signal.

The primary adjustment mechanism the consumer uses is frequency of arrival for a good, the queue size at the check out stand for example. Variance comparisons between the variety of consumer goods is the trick we use to monitor household inventory.

We balance our cash balances the same way we balance our toilet paper inventory. We check to see that toilet paper is balanced with all other goods that come from the grocery store, where my ATM is also located.

Are prices sticky?

Generally not. However, if circumstances force the household to cease shopping at Savemart, and go to the local corner store, then we see a sudden shift in aggregate grocery prices. But at each venue, the prices were relatively liquid and stable.

Can toilet paper be used as money?
Actually Pot, MaryJane is a better substitute for cash; it works great as money around parts of central Calif.

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