I think the real reason “responsible” policymakers fear printing free money even when doing so would solve problems is a fear that the ignorant masses, once they solve one problem this way, will demand free money as the solution to all problems. The Pringles ads used to boast “once you pop, you can’t stop” which in my case is basically true. Consequently, prudence dictates that I never buy a can of Pringles to eat “just a few” chips since in practice I’ll end up eating the whole damn thing.

Most of the time you can’t solve economic problems by printing up free money and handing it out and people know that. So Very Serious People fear that if do solve an economic problem with the printing of free money that the public’s appetite will become insatiable. The conventional wisdom seems to be that something like this (rather than the more parsimonious “Richard Nixon was a bad president”) theory explains the Great Inflation of the 1970s. On the fiscal side, I generally think that similar Pringles Logic rather than some more nefarious conspiracy explains a lot of the behavior of Ari Berman’s austerity people. VSPs don’t think the public can handle the message that sometimes deficits matter a lot and sometimes they don’t matter at all and sometimes they ought to be larger.

In both cases, the idea is that it would be better not to solve present-day problems because doing so might confuse people into pressing for similar solutions in different situations. In turn, it probably reflects the social and economic isolation of elites. If the unemployment rate for the social peers of the highly educated middle aged people who hold the levers of power were 9 percent, they would decide that present-day problems are sufficiently pressing to make it worthwhile to solve them.

Paul Krugman sums up the European tragedy:

A rich, productive continent, which has produced arguably the most decent societies in human history, is tearing itself apart because its elite insisted on embarking on a dubious monetary project, and now can’t bring itself to take the steps necessary to give that project a chance of working.

It is worth reflecting on how much “the steps necessary to give that project a chance of working” are. Think about the level of fiscal exposure a person living in the (rich) Bay Area has to a poor region like Mississippi or West Virginia. It’s essentially unlimited. You’re jointly on the hook for pensions (Social Security) and an extremely generous single-payer health care program for elderly people (Medicare). Those programs jointly, along with Medicaid, aren’t just useful to the program beneficiaries. They’re the pillars of local hospital industries and medical professions, supporting indirectly an array of secondary industries. You’re jointly on the hook for national defense, both as a public service and as an employment opportunity. There’s no real conditionality to any of it. If Mississippi makes bad policy choices that reduce average incomes, the net scale of the transfers goes up. But there’s more to it than formal legal commitments. If a giant lizard crawls out of the Gulf of Mexico and tears up I-55, Congress is going to pony up the funds to fix the highway. It goes on and on and on and there’s just no real limit at the end of the day to the joint exposure. It’s one country we’re all living in as citizens, and we’re all jointly exposed to each other’s public affairs.

Now it’s not that in order to resolve this particular crisis Europeans need to make that kind of leap. But ultimately to “make it work” that’s where you have to go. And if you don’t want to go there, you ultimately need to bust up the currency union.

In New York City the supply of taxi cabs is set by a government statute limiting the number of licenses and the price of a taxi ride is also set by a government agency. So as Felix Salmon says, if the city increased the supply of cabs there would be more cabs on the street but fares wouldn’t fall. DC has a basically free entry system with regulated prices. The result, relative to NYC, is that it’s easier to get a cab. That’s especially true in more peripheral areas of the city. New York’s combination of price controls and supply limits results in endemic taxi shortages in the outer boroughs.

Salmon further goes on to argue that a genuine two-sided deregulation in which both the quantity of cabs and the price of cab rides is set by the market is totally impractical. “If you deregulated cab fares,” he says “utter chaos would result — New Yorkers would basically have to haggle over the cost of a fare every time they got into a cab.” Consequently “the fare schedule has to be set, in advance, by the municipal government.”

In fact in Stockholm they’ve done what Salmon says can’t be done, and taxis are allowed to charge whatever price they like. The main solution to the problem he identifies is that most cabs are affiliated with one of a few large taxi companies that have posted fare schedules. You no more haggle over fares with Taxi Stockholm or TopCab than you bargain with the guy at the butcher counter of your local supermarket over the price of a steak. The prices are posted and the customers take them or leave them. What this system does do is allow for flexibility and innovation in pricing models. It also does allow at the margin for smaller firms or solo drivers to engage in haggling-based fares. One major consequence of this is to greatly facilitate drivers’ ability to rip off tourists (i.e., me when I was there) since the overall setup is unusual and someone who doesn’t live in the city is facing major information asymmetries. Arguably this constitutes a net policy benefit since it sort of makes sense for cities to find subtle ways to screw over visiting tourists.

Long story short, I’m not sure whether the DC model or the Stockholm model is best, but the New York model is inferior to both of them and the Stockholm model is certainly workable. Once upon a time, I suppose almost all retail transactions were oriented around haggling, but precisely because that’s an annoying way to do business the general evolution over time is to posted prices and the same factors work on an deregulated taxi market.