Gary North has written an interesting and insightful piece (as usual). He basically points out that some things have gotten cheaper and that we should factor in the quality of products when we are looking at the price.
I can give my own example. More than ten years ago, I bought a 27 inch television for about $400. I would not be able to buy the same television today, unless I pick it up used on Ebay or somewhere like that. If I spent $400 on a television today, I would get something bigger (screen size), but it would be lighter and it would only be a few inches thick. It would have more features with a higher quality. This is definitely a reduction in price.
I first read Gary North's article on his website and I was wondering if Lew Rockwell would publish it. This could actually be a controversial piece amongst some libertarians. There are a lot of libertarians who, to say it politely, don't think much of the Bureau of Labor Statistics and the Consumer Price Index (CPI). There are a lot of free market thinkers who believe that the CPI is manipulated to understate price inflation and thus make us think we are better off than we really are. I happen to agree with Gary North on this subject (I believe Harry Browne had a similar opinion) and think that the CPI is useful for measuring trends. Of course it will never be totally accurate. That is impossible. But it would be just as impossible to come up with a totally accurate number if it were done by a non-government group. It is impossible because of hedonics.
Now, I would not be one to take Gary North at task on an article relating to anything monetary, and I don't think I'll start here, but I do have an extra point to make. Yes, some things, particularly those in the technology sector, are getting cheaper. Yes, this is due to increased investment and productivity over time. Yes, a computer that costs one thousand dollars today that is twice as fast as a one thousand dollar computer a year ago is a price reduction for what you are getting. With all of that said, this just shows us one thing. In sectors where prices are dropping, productivity is outpacing monetary inflation, but we have absolutely no idea how much we have of each.
If there is no increase in technology or productivity and prices stay flat, then price inflation really is zero. If productivity and technology are increasing rapidly and prices stay flat, then price inflation due to monetary policy is actually high. It is just being offset by the productivity.
I think this is why the CPI is so annoying to so many libertarians. While the CPI is supposed to measure the price index, libertarians equate it to monetary policy. And while there is certainly a correlation, the CPI is really measuring two things that are opposing forces. The CPI is measuring price inflation due to monetary policy and price deflation due to gains in productivity. It is possible to have them go the other way, but not likely, especially in today's world of central banking. Of course, you can also see prices in things like education and healthcare go up faster because of interference by government.
Because of hedonics, it is impossible to know how much of an effect monetary policy has vs. the effect of productivity and technology. It is obvious with televisions, computers, cell phones, digital information, and most other things technology, that we have seen rapid gains and they show no signs of slowing down. This has allowed prices to go down and quality to go up, in spite of continued monetary inflation by the Federal Reserve.
The CPI really is a contest in many ways between the free market (productivity) and monetary policy (money debasement).