I’ve been wondering this question for a while. Ignoring current events, why is a little bit of inflation desirable?
I do understand that it’s done to “stimulate” the economy so people don’t let their cash rot in a checking account, but isn’t it a zero-sum game? Everybody says that money is not meant to stay where it is, rather, should flow through the economy. But if the economy always needs injections of liquidity because otherwise it fails, isn’t the economy broken?
I feel like there’s something I can’t comprehend about that.
The right way to look at how expensive things are is to normalize prices to other things that also change with time, for example wages and expectations.
A car may be more expensive now than in 1960, but the car is faster, safer, more comfortable, and more people have one now.
Same with many improvements- an iPhone today is more expensive than a Nokia 3210 was in 2000, but it has more features and more people have one.
It is against human nature to stay where we are and just use improvements to reduce the amount of work we need to do. We want to have more. That may be a bad thing for sustainability, but we typically expect our governments to support that kind of progress, hence the dual mandate of the central bank to maintain economic growth with a high level of employment and a low level of inflation.
To be clear though since the industrial revolution and until WWII improving technology has both improved quality of life and reduced working hours. The fact that working hours have stagnated at around 40/week is a historical exception that doesn’t get fully or even mostly explained by “we have more and better stuff;” if that was it we should be working 20 hour weeks by now. For more see David Graeber on the subject.
There is a lot of inequality that plays into this.
If you think about 90s Goldman Sachs style of 80-100 hours weeks, no weekends, no holidays culture that dictated “work ethic” expectations in American white collar jobs, to the post covid hybrid work and “quiet quitting” culture: I think the typical white collar worker works way fewer hours than 20-30 years ago, even though contracts said 40 hours the whole time. Anecdotally, a cushy office job at individual contributor level can be apparently kept while working maybe 1-2 hours a day. I know those are not typical, but it’s way more common than it used to. And my perception is that taking weekends and holidays off became normalized, and nobody is virtue signaling anymore that they worked the whole weekend, even if they did. People take their vacations.
Now that doesn’t mean the hours of hourly workers, healthcare workers, construction workers, service and restaurant industry workers, etc, are getting shorter, but as I said, that is more a social equality problem than anything about the economy or inflation rate specifically.
Okay you’re basically right that effective necessary (so discounting bullshit) white collar working hours are declining, but also you should really read the book I linked. It expands on what you said here on multiple levels, and I suspect you’ll find it somewhere between interesting and enlightening.
I’ll check it out!