Arthur Breitman and I have hammered out the following inflation bet:
If the 12 month change of the CPI-U as reported by the BLS is greater
than 5% for any sliding window between today and December 2015 in monthly
increments, I pay Arthur $100. Otherwise, he pays me $3.
May 18 2013
Jim Flynn's latest book has fascinating info on age and intelligence. But Sternberg, Wagner, Williams, and Horvath, "Testing Common Sense" (American Psychologist, 1995) suggest that Flynn misses an important part of the story. There's a widespread perception that "common sense" improves with age:Older adult...
May 17 2013
Ronald Coase famously advised economists to "look out the window" every so often. It's advice I (try to) take to heart. Here's an example. On Monday afternoon, I was standing behind our building waiting for a few people and "enjoying" the smell of the dumpsters behind the cafeteria next door. An obvious externality tha...
May 17 2013
Arthur Breitman and I have hammered out the following inflation bet: If the 12 month change of the CPI-U as reported by the BLS is greater than 5% for any sliding window between today and December 2015 in monthly increments, I pay Arthur $100. Otherwise, he pays me $3.
READER COMMENTS
John Hall
May 17 2013 at 12:16pm
“12 month PERCENT change”
Dan S
May 17 2013 at 3:28pm
I think it was good as it was. The numbers are given in percents, so saying the percent change is no greater than 5% would be redundant. Right?
James Oswald
May 17 2013 at 4:21pm
I don’t even think inflation is going to be that high, but I would be nervous betting 100:3 odds.
Arthur B.
May 17 2013 at 4:44pm
My understanding is that the Bryan Caplan looked at TIPS spreads to get an estimate of future inflation. But this spread only reflects the expected level of inflation and says nothing of volatility. In taking this bet, I’m buying CPI volatility.
BZ
May 17 2013 at 6:27pm
Does anyone know Dr. Caplans analysis of the likely outcome should the fed stop paying interest on all those record reserves? Has he written about it somewhere that can be pointed out?
I would certainly appreciate it.
As it is, Dr. Caplan’s bet announcements on inflation always bury the lede, since the content of his thought it missing. 🙁
Jason Collins
May 17 2013 at 6:44pm
@James Oswald. The reputational factor of announcing it on the blog (with later posts on the result) forms part of Bryan’s pay-off calculations.
Kevin
May 17 2013 at 8:07pm
Bryan’s writing call options on TIPS over treasuries. I think these bets are more interesting when he’s making a market that’s not already there, but it is nice to see the strength of Bryan’s convictions. And Arthur’s, I suppose, although dropping 3 bucks on a spread call is not terribly informative.
Joe Cushing
May 17 2013 at 11:23pm
Do you see it going over 5% in the next 4 years? It seems like we should have another event like the 70s sometime in the next decade.
Arthur B.
May 18 2013 at 1:13pm
@Kevin, I’m willing to put more money behind it if you’re a taker.
Mark Bahner
May 18 2013 at 11:27pm
Yeah, those seem like pretty spectacular odds for only 5% per year inflation.
John Fast
May 20 2013 at 8:39pm
Bryan: Would you be willing to scale the bet? I’ll bet $300 against $10,000 on the same terms.
Comments are closed.