Does trust in money mean trusting there won't be helicopters?
My ebay copy of Azariades' 'Intertemporal Macroeconomics' arrived in the post today, and, excitedly thumbing through it, trying to work out what had caused the previous owner to scrawl ironic exclamation marks, or underline, I stumbled on a paper by Philip Weil from 1987 I had not known about before. It's about the value of money and how it relates to trust in the value of money tomorrow. The model is an overlapping generations model, where money is a store of value. People in the model have in their minds that there is some probability that, for reasons unspecified, money won't have any value tomorrow. For people to accept money today in return for their goods or labour, the probability they have in their heads that money has no value tomorrow has to be sufficiently small. You could characterise the debate about whether helicopter money would be an appropriate response to being stuck in a liquidity trap as revolving around what the loud noise of the blades chuffing overhead would do to this subjective probability. Could such drops be adequately embedded in existing monetary and fiscal institutions and declared objectives that trust is not materially eroded? Or would they blow it? As I said before, right now I don't think it's worth risking to find out, as we have other levers to pull. But this Weil paper was, I thought, a nice way to think about the dilemma.