Consider adjusting for inflation due to labor income injecting cash into the system

[sbenthall]

We have a troubling aspect of the experiment design:

• Consumers get labor income, an injection of money into the economy; they also consume, which removes money from the system
• On balance, we expect them to save and invest, buying more risky assets, which removes them from the market.
• In the limit, consumers will own all the risky assets, because institutional investors will sell them. The II's believe the Lucas price, which does not take inflation due to new money into account.
• Once the consumers own all the assets, there is nothing for them to buy, and the model/market breaks.

This is hard to justify.

One possibility is to build in some logic to take inflation into account.

• Consider HARK money units added as net of labor income minus consumption $I = Y - C$.
• Look at the ratio of new money to the total money supply $I / M$
• Use this to either:
  • adjust the conversion rate from HARK money units to dollars
  • adjust 'nominal returns' to 'real returns'
  • adjust the II view of the true Lucas price for inflation

[sbenthall]

@mesalas Is it possible to get metrics of how many shares and dollars are in ammps to the SHARKFin side so that it's possible to compute the inflation?

[sbenthall]

With permanent labor income uncertainty, consumers have a target wealth level. That means that on balance, the agents will consume out what they earn in. So we should not expect inflation even though we have an economy that is open to influxes and egresses of cash.