The Increasing Deflationary Impact of Technology

[TimeSkip]

A short primer for the topic can be found here:

https://econ243.academic.wlu.edu/2017/04/07/disruptive-deflationary-technology/

Mainly the gist of the issue has to do with technology such as, cell phones, the internet, artificial intelligence, automated services, increasing efficiency and other productivity measures in the economy to create a decrease in prices for the consumer in the economy.

Since the start of the dot com boom consumer prices for digital products have been falling, as seen in the following.

https://www.federalreserve.gov/econ...consumer-digital-access-services-20200715.htm

With the advent of Amazon in the US or Alibaba in China, this effect has spread and slightly accelerated in the economy. There are suspicions that the net effect will contribute to a better life for the consumer due to decreasing costs of hedonic goods such as Netflix or the next 4k TV. It has puzzled me that companies like Apple have been able to survive on its iPhone for so long.

What interests me most are the long term trajectories for a fiat system to survive in a competitive environment. I simply don't see the growth of the economy prospering very well with a US Federal minimum wage of some seven dollars, with growing apathy from the public sector towards progress when the typification of consumer behavior is towards the need for more non-essential goods such as Hulu, online games such as World of Warcraft or Call of Duty, faster internet, and etc.

In a recent news article from Bloomberg, it is said that this tendency has increased or sped up during COVID-19. They say:

Online retailers would continue to benefit from stay-at-home consumers but the pressure on shopping malls would intensify. Many more heavily-leveraged retailers and others with huge debt service would fold.

See.

Now that COVID-19 is coming to an end and new economic trends are arising, my concern or question arising from the above is a question about what will likely happen in the near future due to these tendencies in the economy arising and being enhanced by further more intelligent AI.

I don't mean to sound off my rocker; but, the ever high envious interest of the rich by a rather minimum wage worker as myself would find has been decreasing or dissipating. What are your economic forecasts of consumer behavior or economic tendencies due to the above information provided? Demographics show that there are more retired individuals rather than workers in the economy. Many young adults don't have stable jobs and work online making money from this new sector, which poses a threat to existing industries seeking new job applicants. With the advent of Generalized Artificial Intelligence, this trend will no doubt continue for as long as foresight allows.

So, what are your thoughts?

 

[russ_watters]

A short primer for the topic can be found here:

https://econ243.academic.wlu.edu/2017/04/07/disruptive-deflationary-technology/

Mainly the gist of the issue has to do with technology such as, cell phones, the internet, artificial intelligence, automated services, increasing efficiency and other productivity measures in the economy to create a decrease in prices for the consumer in the economy.

I only skimmed, but I don't see that it says that, and it doesn't make sense to me. Certain products are deflationary for themselves, but that doesn't mean they create deflation for other sectors of the economy. E.G., it looks like the article says computers are deflationary, but luxury cars are not. Please quote something that verifies you have correctly described the thesis.

 

[TimeSkip]

Please quote something that verifies you have correctly described the thesis.

Something like the advent of Generalized Artificial Intelligence could be one example. Another would be something like Uber for the taxi service. Another would be and is well documented the cell phone.

I think those are sufficient examples about what would count as goods that create a deflationary trend in the economic sector.

Here's a better and more documented example:

Accounting for the volume of data, voice and programming consumed using digital access services yields a price index that has fallen rapidly and at an accelerating pace for 30 years. The markedly different price trajectory for this noteworthy component of the consumption basket amplifies the slowdown in consumer prices in recent years, a fact unremarked upon in previous literature.

https://www.federalreserve.gov/econ...consumer-digital-access-services-20200715.htm

Certain products are deflationary for themselves, but that doesn't mean they create deflation for other sectors of the economy.

Can you elaborate on this? I don't quite understand how a good is deflationary of itself. Are you talking about technology or core essential goods over time?