> Again, your whole premise is that nominally stable prices are absolutely necessary and I reject it. I think much more damage would be done trying to keep them nominally stable than by simply allowing to go where they may. Have prices for the things that you think matter been nominally stable in the last 20 years? Cars, houses, medical insurance, rent, travel?
They've been getting more expensive by a few percent a year. It would be better if they didn't change at all but it's the best we can do. The change so far has been small and predictable. Predictable change is the next best thing after no changes.
> I don't see how this is a requirement for a well functioning economy.
So you can plan ahead financially. In order to take up a loan you need to estimate whether your future income -- i.e. the prices for the goods and services you are selling -- will be high enough to pay it off. If you're the lender you're on the other side of the equation. Same for saving for retirement.
> You're singling out tech saying it's an exception: why would that be the case? Is it because the rate of technical progress has been higher (however we measure it) in this sector than in other ones? So what? Should only sectors with stagnating productivity improvements count towards the nominal stability you think is so crucial?
Yes correct the rate of progress has made it unpredictable and that works against maintaining price stability. Every sector should count towards that but if the ones that don't make up a smallish portion of the economy then that's not too bad.
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>They've been getting more expensive by a few percent a year. It would be better if they didn't change at all but it's the best we can do. The change so far has been small and predictable. Predictable change is the next best thing after no changes.
You seem to think that predictable change is still pretty good, so why would it so problematic if change year over year was negative, but still predictable? Imagine all prices, therefore including wages, decreased on average by 0.2% from today until the year 2100 given a fixed money supply.
Where would the difficulties arise in such a scenario? If humans can plan for increasing prices, they can also do so for decreasing ones. Plus I'd argue that for prices to fall is the natural dynamic in a flourishing economy: if we're getting better and better at producing things due to improvements in social organization and technology, why would things end up costing more?
> You seem to think that predictable change is still pretty good, so why would it so problematic if change year over year was negative, but still predictable? Imagine all prices, therefore including wages, decreased on average by 0.2% from today until the year 2100 given a fixed money supply.
Yes predictable change is still pretty good but better predictable increase than predictable decrease. That's why there are target inflation rates of like 1 or 2%. Decreasing prices encourage people to defer spending until later and that leads to a recession and downward spiral and then it's not predictable anymore and the economy will tank in no time. That's why central banks are so worried about deflation. It's better to err a bit on the side of inflation.
> Plus I'd argue that for prices to fall is the natural dynamic in a flourishing economy: if we're getting better and better at producing things due to improvements in social organization and technology, why would things end up costing more?
If we're getting better and better then we should consume more or work less. You can only eat so many loaves of bread but your next vacation can be on Hawaii instead of the campground around the corner. Or the baker that has somehow managed to automate their bread making will still sell the same number of loaves at the same price but work 4 hours a day not 8.
Mind you in addition to what I wrote above, you can't get predictable decrease in prices with a fixed money supply. It'll be unpredictable wild swings.
