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  • Inflation and Technology

    by coldwarrior ( 117 Comments › )
    Filed under Academia, Economy, Inflation, Open thread at October 4th, 2017 - 6:00 am

    This guy ALMOST gets it. Almost. However, he has missed the biggest and most important aspect of inflation and what determines price.

    This is a pet theory of mine that had I stayed in academia I would have done Ph.D Econ work on it.

    Coldwarrior’s Inflation law: Inflation is mitigated by perfect information for both the buyer and the seller across a large market.

    Simply stated, one of the main reasons that we don’t have inflation now, and haven’t really seen much of it since the advent of the internet is that the buyers can instantly check prices on a good or service from an almost infinite amount of sellers nearly instantaneously and make buying decisions based on their preferences. Sellers can check their competitor’s prices on like or the same goods in the same manner. This FORCES efficiencies in the delivery of goods and services because both the buyer and the seller have what is known in economics as ‘perfect information’.

    This is exactly what was not happening before the internet. Yes, you had advertisements in the local paper or on radio/tv. Everyone was tied to Sears and the two or three local supermarkets and a few car dealerships. To get the best deal required much leg work. Most folks had no desire to go to multiple stores and haggle/check prices then buy because time is truly, and in all instances, money. they went where they thought the deal was going to be the best and paid. Sellers counted on that lack of perfect information to make as much profit as possible.

    Yes, as the writer states, technology allows goods to be better and cheaper, but perfect information forces lower prices and this is the root cause of the anti-inflationary aspect of perfect information.

    And now we have Velocity of Money increasing and there is still no inflation.

    WASHINGTON (Reuters) – A measure of U.S. manufacturing activity surged to a near 13-1/2-year high in September as disruptions to the supply chains caused by Hurricanes Harvey and Irma resulted in factories taking longer to deliver goods and boosted raw material prices.

    Still, details of the Institute for Supply Management’s (ISM) survey on Monday underscored the economy’s underlying momentum, with factories reporting stronger order growth last month. A measure of factory employment hit its highest level since 2011.

    and, 3.1% growth

    U.S. second-quarter growth was revised up slightly without altering the bigger picture of a consumer- driven economy that also got a healthy contribution from business spending during the period, Commerce Department data showed Thursday.

    Nowhere is Trump mentioned in these articles, in fact they bend over backwards NOT to mention him and his policies.


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