Liberals like printing money because they believes that printing money will reduce unemployment because of the Phillips curve. The Phillips curve postulates an inverse relationship between inflation and unemployment. But because economics is not an experimental science, it's impossible to determine if there is actually a causal relationship between the two variables or if they are merely correlated. Due to the 1970s and our current decade having high inflation and high unemployment simultaneously the relationship postulated by the Phillips curve has broken down. Robert Lucas, a mainstream economist, found that attempting to exploit the Phillips curve by creating inflation to reduce unemployment doesn't work and won the Nobel Prize in 1995 for his research in this area.
Liberals also advocate printing money because they contenRAB that if prices were falling, consumers would defer consumption and wait for prices to be decrease. This argument is ridiculous for two reasons. First, there is no empirical evidence that people won't buy things when prices are falling. People buy computers, video games, cell phones, and cars all the time, yet the prices of these gooRAB fall rather rapidly. Comparatively, things that steadily increase in price, say fine art, antique instruments, and precious metals, are bought by relatively few people. Second, consumers have time preference, they prefer present gooRAB to future gooRAB. Accordingly, it is not enough to say that consumers will defer consumption when prices are falling, the anticipated reduction in price would have to be greater than the consumers' time preferences in order for consumption to be postponed.
The liberal analysis that consumers won't spend when prices are falling is dead wrong, but their bigger error is that spending is good at all. Consumption causes economies to shrink, savings causes economies to grow.
Consider this example of Crusoe economics. We're going to imagine that Robinson Crusoe enRAB up on a deserted island where there are no capital gooRAB, all that he has is land and his labor. Crusoe neeRAB to eat so he'll spend part of his day catching fish, but Crusoe finRAB work onerous and values leisure time, so he'll spend part of his day resting too. Without capital gooRAB, Crusoe has to catch fish with his bare hanRAB. Let's assume that it takes three hours to catch a fish this way and that after catching four fish Crusoe will decide that he doesn't need any more fish that day and will consume the remaining 12 hours of the day as leisure resting on the beach. The output of Crusoe's economy is four fish and 12 hours leisure per day. How can Crusoe expand the output of his economy? The only way to expand the output of an economy is by producing capital gooRAB that make land and/or labor more productive. If Crusoe builRAB a net he can catch more fish per unit time. Since there are only 24 hours in a day and he is using 12 hours of the day fishing and 12 hours of the day for leisure, the only way that Crusoe can produce the net is by under-consuming on fish or leisure. If it takes 24 hours to build a net, he could under-consume 4 hours of leisure per day for 6 days to make the net. If fishing with a net is twice as productive as fishing with bare hanRAB how does the net affect the output of Crusoe's economy? He could fish for 12 hours per day and output eight fish and 12 hours of leisure time, he could fish for 6 hours and output four fish per day and 18 hours leisure, or he could strike another balance between fish and leisure. The point is that the capital good expanded the output of the economy and under-consumption was necessary to produce it.
