Inflation worries the general public much more than it does the economics profession, and economists remain perplexed as to exactly why. The costs that concern economists are inflation’s deadweight loss. But that is only a part of the losses that concern the public, because inflation simultaneously transfers some of people’s income into the hands of government. The fact that the seigniorage tax may pay for programs they favor is a separate issue. Moreover, unlike income and other taxes, which people in democratic countries may think they have some control over through voting, seigniorage appears utterly arbitrary. In fact, people can be aware of the fall in their real cash balances without realizing at all that government gains. Admittedly the magnitude of this tax is low in developed countries like the United States, even when inflation hits double digits. But that hardly justifies indifference to dollars that inflation takes from the public and gives to the government. The public may still overestimate the costs of inflation after including their losses through the seigniorage transfer. Yet macroeconomists are guilty of overlooking the public’s dislike for this implicit tax.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Atlas Economic Research Foundation in its journal Econ Journal Watch.
Volume (Year): 4 (2007) Issue (Month): 1 (January) Pages: 46-59 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H60 - Public Economics - - National Budget, Deficit, and Debt - - - General