Allowing, say, able Mexican workers to move the US where they can be matched with appropriate capital, allowing them to be more productive, could indeed increase the productivity of the economy, which if everything else stayed the same would reduce prices. In this respect, it’s similar to any sort of technical innovation, which also would tend to increase supply. But inflation or the lack of inflation can exist in an economy regardless of whether or not such productivity improvements are taking place, just due to government policy on money creation. To think of the economic effect of immigration in terms of inflation seems odd, just as it would be odd to think of the economic effect of inventing a more efficient electrical motor in terms of inflation—in both cases, it’s more useful to think in terms of the effect on people’s real standard of living.
“I thought the typical response, even according to Keynesians, is to increase interest rates, therefore reducing money supply, rather than creating more money.”
That would be the typical response if they were actually trying to reduce inflation. Keynesians aren’t totally stupid. They know perfectly well that Milton Friedman was right. They just don’t want to stop inflation.
“While some people ask for price or wage controls, it seems like its a fairly fringe view”
Price and wage controls were in fact instituted in the 1970s, in the US and in Canada. They did not stop inflation, of course. Inflation stopped only when the money creation stopped.
Allowing, say, able Mexican workers to move the US where they can be matched with appropriate capital, allowing them to be more productive, could indeed increase the productivity of the economy, which if everything else stayed the same would reduce prices. In this respect, it’s similar to any sort of technical innovation, which also would tend to increase supply. But inflation or the lack of inflation can exist in an economy regardless of whether or not such productivity improvements are taking place, just due to government policy on money creation. To think of the economic effect of immigration in terms of inflation seems odd, just as it would be odd to think of the economic effect of inventing a more efficient electrical motor in terms of inflation—in both cases, it’s more useful to think in terms of the effect on people’s real standard of living.
“I thought the typical response, even according to Keynesians, is to increase interest rates, therefore reducing money supply, rather than creating more money.”
That would be the typical response if they were actually trying to reduce inflation. Keynesians aren’t totally stupid. They know perfectly well that Milton Friedman was right. They just don’t want to stop inflation.
“While some people ask for price or wage controls, it seems like its a fairly fringe view”
Price and wage controls were in fact instituted in the 1970s, in the US and in Canada. They did not stop inflation, of course. Inflation stopped only when the money creation stopped.