“We better hang up. This call is getting very expensive.” It’s something no one says anymore, but it was the norm right up to the dawn of the 21st century, and realistically beyond. Long distance calling used to be very expensive.
So were computers very pricey. The typical desktop on offer in the 1990s cost thousands and thousands of dollars. As Bret Swanson has pointed out, accessories like mouses were extra back then. Internet access? For most, it wasn’t even a thing. Does anyone remember internet cafes that included the rental of laptops that came with internet connectivity? What about flat-screen TVs of the 4K variety, and that not terribly long ago retailed for $25,000. Luxury purchases for the very, very rich.
As most know, the prices of long distance, computers, and televisions have plummeted in modern times. A recession indicator? No, just a sign of progress. Contra economists who believe economic growth must be managed by the central planners at the central bank lest the “economy” grow too fast and spark rising prices, the surest sign of economic growth is falling prices.
Yes, economists get it backwards as is the case with so much that they analyze. Consumption that’s always and everywhere an effect as opposed to a driver of economic growth has nothing to do with growth, but investment has everything to do with it. When talent is matched with capital (investment), the talented divine all manner of new ways to produce exponentially more for exponentially less on the way to falling prices. It’s the personification of growth.
Thanks to relentless pursuit of production enhancements, the dollars we earn exchange for more and more. And no, this isn’t deflation any more than rising prices are inflation. When a price or prices increase, we logically have fewer dollars to purchase other goods and services. Conversely, when the prices of certain goods decline as is the norm in a growing economy, the range of goods we have the means to pursue grows.
Please keep this in mind as economists and pundits comment on the oil price, and oil-price declines. It’s frequently said that such a decline signals a “recession.” Paraphrasing Henry Hazlitt, it’s amazing even the ignorant could believe something so at odds with reality.
After which, “economies” aren’t some living, breathing blob, they’re just people. And particularly as oil and its byproducts are so essential to so much having to do with life and soaring living standards, how could it ever be that lower costs for that which is so essential to life could ever signal economic decline? Precisely because oil is so central to progress, a lower price per barrel is arguably the most bullish economic signal of all.
Yet economists and pundits persist in the odd pretense that 1 plus 1 equals eight such that falling oil prices are an economic threat. Quite the opposite.
If readers are still skeptical, look back to the 1980s and 1990s. Oil was so cheap in the ‘80s that a barrel at times got as low as $7. As late as 1998, a barrel could be had for $10. Was the U.S. “economy” a wreck, and were stocks in freefall? Logically not. With the most important commodity economic input of all very inexpensive, exponentially more investment headed for the U.S. could find its way to what the great Warren Brookes (1929-1991) referred to as “the economy of the mind.”
The simple truth is that people drive the big, wondrous economic leaps, and there’s a great deal more investment in people when the inputs to progress decline in cost. Oil is not unique in this regard despite efforts of the deep in thought to frame it as some kind of other.
