Does Rounding Prices Create Inflation and Impact the Economy?

  • Thread starter Thread starter Mattius_
  • Start date Start date
  • Tags Tags
    Inflation
Click For Summary

Discussion Overview

The discussion revolves around the impact of rounding prices on the economy, specifically whether this practice creates money and contributes to inflation. Participants explore various perspectives on the implications of rounding in financial transactions and its historical context.

Discussion Character

  • Debate/contested
  • Conceptual clarification
  • Historical

Main Points Raised

  • Some participants propose that rounding prices, such as changing $56.795 to $56.80, creates money, while others challenge this notion, suggesting it has a negligible impact on the economy.
  • A participant shares an anecdote about a programmer who allegedly exploited rounding practices, raising questions about the potential for financial discrepancies.
  • Another participant argues that the effects of rounding are balanced, as there are equal occurrences of rounding up and rounding down.
  • One participant introduces the concept of "dwell time" in banking transactions, suggesting that historical delays in processing may have led to significant economic effects, separate from rounding issues.
  • There is a contention regarding the frequency of rounding up versus rounding down, with participants debating the mathematical basis for their claims.

Areas of Agreement / Disagreement

Participants express differing views on the economic implications of rounding prices, with no consensus reached on whether it creates money or affects inflation. The discussion includes competing perspectives on the frequency and impact of rounding practices.

Contextual Notes

Participants reference historical practices in banking and the transition from paper to digital transactions, indicating that the discussion may be influenced by varying interpretations of economic principles and practices.

Mattius_
Messages
8
Reaction score
0
when a price of $56.795 is rounded to $56.80 money is created... would you say this has a negligable impact upon our economy?
 
Physics news on Phys.org
Urban Legend has it that one of the first programers to write code for a bank decided to have the program deposit all of those rounded off fractions of a cent into his personal account. Frist he was rich then he was in jail.


I am not sure how it could have an effect on the economy, after all it is not "created" money it is simply accurate book keeping.
 
Originally posted by Mattius_
when a price of $56.795 is rounded to $56.80 money is created... would you say this has a negligable impact upon our economy?

Yes, because just as many round ups occour as round downs.
 
A friend of mine is really into economics. He was telling me that when computer systems started providing virtually immediate updates to banking transactions, hundreds of billions of dollars simply disappeared from the US economy. I have no idea to what extent this affected the world economy. This was not due to round off; it was due to dwell time. When the world ran on paper, a tremendous amount of false wealth existed due to debt that was floating - much like floating a check. The delay of days or even weeks became a standard. The money people knew how to use this to their advantage.
 
no, there arent as many round ups as there are round downs... there are 4 decimals to round down to, there are 5 to round up to.
 
Originally posted by Mattius_
no, there arent as many round ups as there are round downs... there are 4 decimals to round down to, there are 5 to round up to.

Try again.
0-4 5 round down
5-9 5 round up

Or are you not counting anything between .0xx and .1xx ?
 
0 would be an exact and correct measurement... I am not counting 10 either because it would also be exact. neither 0 nor 10 need rounding...
 

Similar threads

  • · Replies 25 ·
Replies
25
Views
3K
  • · Replies 24 ·
Replies
24
Views
9K
  • · Replies 13 ·
Replies
13
Views
4K
  • · Replies 35 ·
2
Replies
35
Views
18K
  • · Replies 4 ·
Replies
4
Views
2K
  • · Replies 193 ·
7
Replies
193
Views
21K
  • · Replies 7 ·
Replies
7
Views
3K
  • · Replies 14 ·
Replies
14
Views
3K
  • · Replies 10 ·
Replies
10
Views
4K
  • · Replies 5 ·
Replies
5
Views
7K