[ExI] Inflation graph

[BillK]

On Sat, Nov 30, 2013 at 8:53 AM, Anders Sandberg  wrote:
> On 2013-11-30 00:36, Kelly Anderson wrote:
> On Fri, Nov 29, 2013 at 12:18 PM, John Clark wrote:
>> So your theory can't make good predictions. A theory that can't make good
>> predictions is as useless as a sack full of dead rats in a tampon factory.
>
>
> Isn't that pretty much the entire field of Economics? If you could predict
> it, someone would make money off of that prediction, forcing the prediction
> to not come true.
>
>
> That is a bit of a misunderstanding: it only applies to efficient financial
> markets. Economics also predicts that if you lower the price of your
> lemonade, more people will tend to buy it.
>

I doubt if you can call that a prediction. (Agreeing with John).

It is a naive observation that if the price is cheaper people can
afford to buy more.
The original claim is that *all things being held equal*, lower price
equals more sales.
But there are so many exceptions, that it cannot be a prediction. In
real life all things are never held equal.

For example, it assumes the price of competing products doesn't change.
A new product may appear which people prefer, regardless of price.
There may be a tax increase so that people have less money to spend.
The product may become unfashionable as public taste changes or the
product appears 'cheap'.
A TV program may warn against health risks for the product.
The FED may print money in a way that makes people spend money elsewhere.

In real life it cannot be a prediction. At best you can say that
*sometimes* lowering the price will mean selling more. And sometimes
you only sell more for quite a short period of time (until everything
else reacts to the cheaper price).


BillK