The Right Kind of Deflation

I recently saw an advertisement for a 55-inch LED television for about $800.  I got a 55-inch about 2 years ago for $1,000 and I thought it was a pretty good deal at the time.  My television is a better name brand, but it is also not LED.  In just 2 short years, prices have come down significantly, while the quality has gone up.  This is price deflation, in spite of monetary inflation.  It is the best kind of price deflation.  It is due to increased technology and productivity.

Gary North recently wrote an article on how our lives are improving.  I like the optimism.  I am pessimistic on several fronts, particularly regarding the overall economic picture in the short term.  This is because of bad government policy.  It is because of too much government spending and regulation.  Despite these massive barriers, the free market continues to find holes in which to innovate.  Technology in electronics has been able to improve dramatically, in spite of big government.

It is really a strange world we live in today.  In some ways, our lives become more difficult.  Health insurance and medical care get more expensive.  Education gets more expensive, at least when dealing with government education and the other institutions that try to compete.  Education in regards to self-learning is vastly cheaper, mostly because of the internet.

So while some of the necessities and other high priority things become more expensive, other things, mostly in electronics, get better and better, and cheaper and cheaper.

There is now a high quality 152-inch television hitting the market for $500,000.  This will be for really wealthy people, at least at the start.  But that is the way most things start out.  You could have said the same thing about cars about a hundred years ago.  But then someone like Henry Ford came along and mass produced them for the general population.

A 55-inch television was not a common thing for middle class America, even just 10 years ago.  Now it is a common thing and the quality is far better.  In terms of televisions and computers and cell phones, our lives are dramatically better than they were just 10 years ago.

I was recently at a park with my kids and we walked to a nearby lake.  My 5 year old daughter asked me if there were any alligators in the lake.  I said that there could be, but that I didn't know.  Then she said to me, "look on your phone."  She thinks I can find all of the answers in life on my cell phone.  While my phone couldn't tell me if there were any alligators in the lake (is there an app for that?), it is remarkable how much information we have at our fingertips today.

Long term, I am an optimist.  In spite of big government, I think our lives will continue to get better in many ways, even if we take steps back sometimes.  We often don't notice how much better off we are until we look back and realize the things we didn't have.

While government has not been able to stop advancing technology, I think technology will be able to beat back big government.  Think about what email and cell phones are doing to the Post Office.  That is our future.