October 5, 2017

IT'S A DEFLATIONARY EPOCH:

NO INFLATION? TECHNOLOGY MAY HAVE LEFT IT BACK IN THE 20TH CENTURY (ZACHARY KARABELL, 9/30/17, Wired)

[T]he cost of most of life's necessities, from food to clothing to shelter, has stabilized or dropped over the past two decades care of the deflationary effects of technology. It isn't just that you can get a large flat-screen TV for next to nada. You can get a car that uses less fuel and is far safer for less money (inflation adjusted) than a gas guzzler of yesteryear. Thank, in part, composite materials, which also require less energy to produce than 20th century steel. You can get a smorgasbord of caloric abundance for a fraction of the cost of a much less varied diet in 1950; you can access new medicines to extend lives by years; and you can access for free on the Internet incalculable reams of data, costing you nothing but your time.

For some aspects of our lives, there is no apples-to-apples comparison with the past. With Moore's Law and the compression of data and power, today's smartphones are the equivalent of yesterday's supercomputer that cost 1,000 times as much, guzzled electricity and demanded expensive cooling systems. Electrifying a grid that needed to fuel that and billions of incandescent bulbs was costly compared with the dollop of energy needed to power LEDs. That washing machine, with its smart chips monitoring the size of your load? That smart thermostat in your home dynamically adjusting heat and air-conditioning? They also reduce costs, and overall electric demand, even in their limited numbers so far.

And this doesn't even begin to adjust for the possible efficiencies and benefits of the app economy that can connect buyers of goods and services with sellers with fewer frictional costs of middlemen scheduling and booking and coordinating. The TaskRabbit and Uber economy has pitfalls to be sure, but it surely does not drive prices up.

These are a tiny fraction of the examples of how our economy differs from the 20th century industrial economy. Similar changes are under way in the developing world, as labor gives way to robotics and basic goods become affordable and accessible to the planet's billions. 

Nor does it adjust for Thatcher and Reagan ending wage inflation and resuming the expansion of free trade twenty years before that.
Posted by at October 5, 2017 9:59 AM

  

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