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Price Deflation and the Horrors of Falling TV Prices

Summary:
For nearly a century, the state and its various allies have propagandized generations of college kids into believing that falling prices are a detriment to society. This would seem a difficult task given the absurdity of the claim, but this convenient lie has justified decades of theft from the poor to the very elites who subscribe to it. As such, it is easy to see the appeal. As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” For many who regularly read these pages, this article may be nothing new. The facts and concepts laid out are so obvious as to not need explaining, and yet decades of policy from the state prove otherwise. As such, this article will use the concrete example of televisions to show that

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For nearly a century, the state and its various allies have propagandized generations of college kids into believing that falling prices are a detriment to society. This would seem a difficult task given the absurdity of the claim, but this convenient lie has justified decades of theft from the poor to the very elites who subscribe to it. As such, it is easy to see the appeal.

As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

For many who regularly read these pages, this article may be nothing new. The facts and concepts laid out are so obvious as to not need explaining, and yet decades of policy from the state prove otherwise. As such, this article will use the concrete example of televisions to show that falling prices do not lead to disaster. On the contrary, falling prices make us richer. It is the state, buried in debt, that fears deflation.

We’ll start by letting CBS News lay out the crux of the inflationist argument: “If you’re thinking of buying a new car and expect the price will be a lot lower six months from now, why not wait? Thus, falling prices shift consumption from the present to the future as consumers wait for prices to fall, and the drop in demand can further depress the economy, lead to more price decreases, more cuts in spending—and a downward spiral into a recession.”

“Why not wait?” asks CBS News. Maybe because you need a car to get to work tomorrow and replacing the transmission in your current car costs more than the vehicle is worth. Would people also stop eating due to falling food prices? It is difficult to imagine the average person asking such absurd questions, but to truly win the argument, we must also consider luxury goods like TVs.

In a world of falling TV prices, why wouldn’t we just wait forever to buy a TV? For starters, we’d never have a TV. More generally, individuals will perform economic calculation. They will compare the benefit of having the TV now against the savings gained by waiting a year.

The chart below shows the US price index for televisions from 1950 to 2021. In that time, the price of a TV fell by 99 percent. Since 2000, the drop in prices has been especially steep.

Source: Bureau of Labor Statistics.

Rather than causing a downward spiral of delayed spending, the number of households with a TV has continued to increase to all-time highs.

Inflation propaganda does contain a kernel of truth. The best lies usually do. Consumption will certainly be higher in an inflationary regime compared to a deflationary one. This is a natural consequence of people trying to keep their wealth from being stolen. Look to any hyperinflation event to see this behavior at its most extreme. During these events, it’s better to buy hard assets that can’t be quantitatively eased. When facing only “modest” inflation, consumption is encouraged but to a lesser degree. In no way does this relationship imply a deflationary death spiral. Instead, modest deflation would imply a modest propensity to save rather than consume. This is something we should encourage, but imagining positive feedback loops where none exist is a common theme in statist fearmongering.

In a free market, prices tend to fall due to gains in productivity stemming from capital accumulation. A tractor, for example, can replace the manual labor of many men, and the resulting abundance leads to lower prices. For the past seventy years, entrepreneurs have developed capital-intensive methods to produce more and better TVs for less. This has resulted in more TVs purchased and a higher quality of life for the average person. This is despite thousands of doctoral theses written to the contrary over the same period.

Why, then, the lie? Given two competing views of the world, the state will always promote the one that increases its power to extract wealth from its citizens. The choice between inflation and deflation is an easy one. Deflation empowers the citizen by allowing her modest savings to purchase more goods over time. Calling for inflation empowers the state by allowing it to print more money and by reducing the size of its enormous debts in real terms. It should be no surprise that state-funded academic institutions preach the virtues of inflation. Neither should it surprise us that well connected banks and corporations, those closest to the free money spigot, sing its praises on the news networks they fund. Not only do they get first access to the new money, but inflation encourages average people to buy their stock to protect their savings. This raises the price of stocks, further enriching corporate leaders.

There is no grand conspiracy pushing inflationary policies. Would that there were so that we could root it out and destroy it. Instead, it is the emergent behavior of countless state and state-adjacent actors each seeking to maximize their power, wealth, and prestige. The only way to delay the inexorable debasement of the currency and the citizenry is to make them aware of the theft and agitated enough to fight against it. Even this can only delay the inevitable. Only complete separation between money and state will save us. The average voter may not have a degree in economics, but they do understand rising food and energy prices. We must make it clear to them that the publicly stated goal of elites and the banking cartel is precisely the higher prices they are now struggling under. TVs give us an easy example to counter the propaganda that falling prices are “actually” bad for us.

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Mises Institute
The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, we seek a profound and radical shift in the intellectual climate: away from statism and toward a private property order.

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