Scott Sumner is still on that the illusion of more money increased transaction velocity.
Transaction rates are the measure of economic efficiency. Pricing and money supply follow transaction efficiency.
What is the measure of transaction efficiency?
Can the finite supply network change rank without disrupting relative flows, that is can the supply network adapt adiabatically. If external oil supplies change, then we expect oil pricing to integrate into the economy relatively smoothly. All supply networks will contract (or expand) evenly to oil shortages, and all inventories have enough slack to accomplish this adaptation without imbalancing supply and demand along the network flow of goods.
Transaction rates compared to what, exactly?
Since we are pricing with money, what is the variation, or adaption time, to acquire the value of money over the whole economy. That determines pricing variations, and transaction rates will be slow enough to bound that variation. Mathematicians can figure this out.
What does a supply network look like?
A graph, each node will have distribution channels, small have one, and medium firms have two, large firms have three. It is the simple fact of counting, and the simple fact of storing things that are counted. Small firms remove the average pricing noise and leave a demand spectrum that is quadratic. Mid size firms can balance the symmetric noise by delivering to the small firms, leaving cubic asymmetric demand noise. large firms can balance that noise symmetrically around a cubic root. It goes no further because the optimum inventory storage ratio is the natural log, 2.78...., which is not finite.
I still have no idea why monetary illusion is still part of the theory.
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