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- Title
On the Welfare Macroeconomics of Government Financial Policy.
- Authors
Tobin, James
- Abstract
Is welfare, as indicated by per capita private and collective consumption, lower in long-run steady states with higher inflation rates? On the one hand, inflation diverts resources from production to economizing of cash holdings. On the other, those same economies create extra room for capital in the portfolios of finite-horizon savers; and seignorage from inflationary money creation permits tax reductions favorable to accumulation of wealth and capital. It is shown that the optimal inflation may be positive. Therefore, contrary to Feldstein, sacrifices of current output and employment may not be justified by the disinflation they bring about.
- Subjects
WELFARE economics; CONSUMPTION (Economics); PRICE inflation
- Publication
Scandinavian Journal of Economics, 1986, Vol 88, Issue 1, p9
- ISSN
0347-0520
- Publication type
Article
- DOI
10.2307/3440270