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Baby Sitting Co-op...an argument for stimulus

twocupcakes
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1/3/2013 6:27:01 PM
Posted: 3 years ago
http://www.slate.com...

This link tells the story of a the Capitol Hill baby sitting co-op. A group of families agreed to baby sit each others children. Families got a "coupon" every time they baby sat, and spent a "coupon" every time they went out and needed baby-sitting for their own children.

So, couples would try to build up a reserve of "coupons" by doing as much baby-sitting as they can, when staying in. So they have coupons to spend when they go out. For reasons, the number of coupons in circulation remained low. Couples were eager to do baby-sitting work to get coupons, yet were not wanting to go out and use there coupons. As a result, there were not many opportunities to baby-sit. The co-op was in a recession!

Though there was much opposition to this plan, the co-op eventually solved this problem by issuing more coupons. This worked, people spent/went out more, so there were more opportunities work/baby-sit. Baby sitting opportunities increased

"Since most of the co-op's members were lawyers, it was difficult to convince them the problem was monetary. They tried to legislate recovery"passing a rule requiring each couple to go out at least twice a month. But eventually the economists prevailed. More coupons were issued, couples became more willing to go out, opportunities to baby-sit multiplied, and everyone was happy."

The co-op was not in a recession because of lazy people, or flaws in the babysitters, it just had too many people, with too few coupons. Printing more coupons was the solution.

"Above all, the story of the co-op tells you that economic slumps are not punishments for our sins, pains that we are fated to suffer. The Capitol Hill co-op did not get into trouble because its members were bad, inefficient baby sitters; its troubles did not reveal the fundamental flaws of "Capitol Hill values" or "crony baby-sittingism." It had a technical problem"too many people chasing too little scrip"which could be, and was, solved with a little clear thinking. And so, as I said, the co-op's story helps me to resist the pull of fatalism and pessimism."

This is article a pretty good analogy for economic stimulus and worth a read. What do you think?
tmar19652
Posts: 727
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1/3/2013 6:33:08 PM
Posted: 3 years ago
At 1/3/2013 6:27:01 PM, twocupcakes wrote:
http://www.slate.com...

This link tells the story of a the Capitol Hill baby sitting co-op. A group of families agreed to baby sit each others children. Families got a "coupon" every time they baby sat, and spent a "coupon" every time they went out and needed baby-sitting for their own children.

So, couples would try to build up a reserve of "coupons" by doing as much baby-sitting as they can, when staying in. So they have coupons to spend when they go out. For reasons, the number of coupons in circulation remained low. Couples were eager to do baby-sitting work to get coupons, yet were not wanting to go out and use there coupons. As a result, there were not many opportunities to baby-sit. The co-op was in a recession!

Though there was much opposition to this plan, the co-op eventually solved this problem by issuing more coupons. This worked, people spent/went out more, so there were more opportunities work/baby-sit. Baby sitting opportunities increased


"Since most of the co-op's members were lawyers, it was difficult to convince them the problem was monetary. They tried to legislate recovery"passing a rule requiring each couple to go out at least twice a month. But eventually the economists prevailed. More coupons were issued, couples became more willing to go out, opportunities to baby-sit multiplied, and everyone was happy."

The co-op was not in a recession because of lazy people, or flaws in the babysitters, it just had too many people, with too few coupons. Printing more coupons was the solution.


"Above all, the story of the co-op tells you that economic slumps are not punishments for our sins, pains that we are fated to suffer. The Capitol Hill co-op did not get into trouble because its members were bad, inefficient baby sitters; its troubles did not reveal the fundamental flaws of "Capitol Hill values" or "crony baby-sittingism." It had a technical problem"too many people chasing too little scrip"which could be, and was, solved with a little clear thinking. And so, as I said, the co-op's story helps me to resist the pull of fatalism and pessimism."

This is article a pretty good analogy for economic stimulus and worth a read. What do you think?

I still don't think that a stimulus cut from borrowed money is a good idea. Babysitting coupons have a much smaller impact than a country with a multi-trillion dollar GDP.
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first." -Ronald Reagan

"The notion of political correctness declares certain topics, certain ex<x>pressions even certain gestures off-limits. What began as a crusade for civility has soured into a cause of conflict and even censorship." -George H.W. Bush
darkkermit
Posts: 11,204
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1/3/2013 6:39:10 PM
Posted: 3 years ago
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.

Peter Schiff explains why the logic is wrong.
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twocupcakes
Posts: 2,748
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1/3/2013 7:20:53 PM
Posted: 3 years ago
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

While this is not the perfect analogy for an economy, having everything be the same price applies to the actual economy in many circumstances. (A pizza is usually the same price on New Years Eve or the Superbowl Sunday as a random Tuesday. ) The analogy is not perfect, but is is still fairly decent.

In the short run printing money will stimulate the economy. Schiff talks about how this would lead to problems in the long run, like it did in the co-op. But, if the proper amount of money is printed, wouldn't getting a quick recovery be worth adverse effects down the road?
tmar19652
Posts: 727
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1/3/2013 7:23:28 PM
Posted: 3 years ago
At 1/3/2013 7:20:53 PM, twocupcakes wrote:
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

While this is not the perfect analogy for an economy, having everything be the same price applies to the actual economy in many circumstances. (A pizza is usually the same price on New Years Eve or the Superbowl Sunday as a random Tuesday. ) The analogy is not perfect, but is is still fairly decent.

In the short run printing money will stimulate the economy. Schiff talks about how this would lead to problems in the long run, like it did in the co-op. But, if the proper amount of money is printed, wouldn't getting a quick recovery be worth adverse effects down the road?

Printing money solves nothing. I do not want the money I have devalued and nor do I want to deal with the long term consequences.
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first." -Ronald Reagan

"The notion of political correctness declares certain topics, certain ex<x>pressions even certain gestures off-limits. What began as a crusade for civility has soured into a cause of conflict and even censorship." -George H.W. Bush
twocupcakes
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1/3/2013 7:31:56 PM
Posted: 3 years ago
At 1/3/2013 7:23:28 PM, tmar19652 wrote:
At 1/3/2013 7:20:53 PM, twocupcakes wrote:
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

While this is not the perfect analogy for an economy, having everything be the same price applies to the actual economy in many circumstances. (A pizza is usually the same price on New Years Eve or the Superbowl Sunday as a random Tuesday. ) The analogy is not perfect, but is is still fairly decent.

In the short run printing money will stimulate the economy. Schiff talks about how this would lead to problems in the long run, like it did in the co-op. But, if the proper amount of money is printed, wouldn't getting a quick recovery be worth adverse effects down the road?

Printing money solves nothing. I do not want the money I have devalued and nor do I want to deal with the long term consequences.

Printing money will cause inflation in the long run, and increase GDP in the short run. Down the road it will also be pretty bad to have slow GDP growth and high unemployment. At least with a stimulus, people are not as unemployed and reliant on government programs (which you do not like). Also, inflation is low in the USA, so the USA can afford some.
darkkermit
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1/3/2013 7:55:14 PM
Posted: 3 years ago
At 1/3/2013 7:20:53 PM, twocupcakes wrote:
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

While this is not the perfect analogy for an economy, having everything be the same price applies to the actual economy in many circumstances. (A pizza is usually the same price on New Years Eve or the Superbowl Sunday as a random Tuesday. ) The analogy is not perfect, but is is still fairly decent.

only in the short-run and businesses are willing to lose money or fail to increase prices on some days since keeping customers happy in the long-run is often more preferable to earning a quick profit to take advantage of high demand.

In the short run printing money will stimulate the economy. Schiff talks about how this would lead to problems in the long run, like it did in the co-op. But, if the proper amount of money is printed, wouldn't getting a quick recovery be worth adverse effects down the road?

I agree with keynesian economics, only that the baby-sitting co-op is a poor example.
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tmar19652
Posts: 727
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1/3/2013 7:56:00 PM
Posted: 3 years ago
At 1/3/2013 7:31:56 PM, twocupcakes wrote:
At 1/3/2013 7:23:28 PM, tmar19652 wrote:
At 1/3/2013 7:20:53 PM, twocupcakes wrote:
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

While this is not the perfect analogy for an economy, having everything be the same price applies to the actual economy in many circumstances. (A pizza is usually the same price on New Years Eve or the Superbowl Sunday as a random Tuesday. ) The analogy is not perfect, but is is still fairly decent.

In the short run printing money will stimulate the economy. Schiff talks about how this would lead to problems in the long run, like it did in the co-op. But, if the proper amount of money is printed, wouldn't getting a quick recovery be worth adverse effects down the road?

Printing money solves nothing. I do not want the money I have devalued and nor do I want to deal with the long term consequences.

Printing money will cause inflation in the long run, and increase GDP in the short run. Down the road it will also be pretty bad to have slow GDP growth and high unemployment. At least with a stimulus, people are not as unemployed and reliant on government programs (which you do not like). Also, inflation is low in the USA, so the USA can afford some.

Market this to a guy who has a stable job and a bank account.
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first." -Ronald Reagan

"The notion of political correctness declares certain topics, certain ex<x>pressions even certain gestures off-limits. What began as a crusade for civility has soured into a cause of conflict and even censorship." -George H.W. Bush
twocupcakes
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1/3/2013 8:41:27 PM
Posted: 3 years ago

only in the short-run and businesses are willing to lose money or fail to increase prices on some days since keeping customers happy in the long-run is often more preferable to earning a quick profit to take advantage of high demand.

I agree with keynesian economics, only that the baby-sitting co-op is a poor example.

Yeah, well I suppose it has flaws. However, prices are sticky in the short run, in the real economy also. I think it illustrates the concept of how everyone wanting to save causes recessions as then no one can work.
twocupcakes
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1/3/2013 8:44:16 PM
Posted: 3 years ago
^

Furthermore, it illustrates short run stimulus effects well. However, it is a bad example to see what would happen in the long run.
Jake-migkillertwo
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1/3/2013 9:22:40 PM
Posted: 3 years ago
At 1/3/2013 6:39:10 PM, darkkermit wrote:
A system with fixed rates of "babysitting" without taking into consideration supply and demand factors is bound to fail. It assumes that an hour of babysitting is always worth the same, regardless of time or day which is false.
Considering that there are days when people want a babysitter and days where babysitting isn't so much in demand, (for example: New year's eve would be a day where babysitting would be in demand). More demand for babysitting during the weekends and so forth.



Peter Schiff explains why the logic is wrong.

I've read the austrian critiques of this thought experiment. It's interesting, but I think it misses the mark.

The recession in the babysitting co-op could be cured one of two ways
1: reduce the nominal price of babysitting
2: Increase the amount of scrip in circulation.

The mechanism by which these actions cure recessions is exactly the same: it increases the supply of real money balances. The supply of real money balances is given by M/P, where "M" is the amount of money, and "P" is the price level.

You can increase the supply of real money balances by increasing M, or decreasing P. Getting rid of price controls can reduce P, but for reasons understood by the New Keynesian school of economics, increasing M is probably a lot more reliable than allowing markets to reduce P.
malcolmxy
Posts: 2,855
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1/4/2013 5:55:58 AM
Posted: 3 years ago
Have the FED drop interest rates by 3/4 of a point to a full point. This requires no borrowing and increases the money supply almost immediately after the announcement is made.

Inflation be damned. The FED has been too worried about inflation since Greenspan made it his life's goal to keep inflation low, first and foremost, sacrificing nearly all other goals for this one pursuit.

Who derives the most benefit from low inflation? That's right - people/entities who are sitting on a ton of cash, like...oh, I don't know...like every member bank of The FED.

You wanna fight inflation for yourself? Invest instead of holding your wealth in cash. As it turns out, this would be exactly what the economy would use to stabilize the high inflation rate.
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