Some good news on inflation

The Economist has an interesting review of the book Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet. The book is an argument that more people in the world is a positive, not a negative development. In recent years, China has used the one-child policy to reduce population growth; Alexandria Ocasio-Cortez questioned whether it is ethical to have children due to the additional environmental impact.

However, more people means more innovation and often more abundance and lower prices, rather than more scarcity. Further, more human population has lead to lower prices historically:

It was the inspiration behind a bet between the late Julian Simon, an economist, and Paul Ehrlich, a population alarmist, in 1980. Mr Ehrlich was sure that the world was running out of stuff, so a basket of commodities (chromium, copper, nickel, tin and tungsten) would get more expensive over the next decade. Simon reckoned human ingenuity would unlock new resources, so they would get cheaper. Simon won the bet.

The authors also show that the prices have declined over the past decades. Rather than trying to adjust for inflation using government statistics, they use the number of working hours needed to buy a good as a measure of changes in prices over decades.

The average time-price of a basket of 50 commodities, from uranium and rubber to tea and shrimp, fell by 72% worldwide between 1980 and 2018. Resources are becoming more abundant (ie, available to more people) as new ways to find and exploit them are invented. The time-price of many manufactured goods fell even faster. In 1997 it took a typical blue-collar worker in America 828 hours to buy a flat-screen television; by 2019 that had fallen to 4.6 hours.

But has increasing human population exacerbated inequality across countries? Authors Tupy and Poole argue the answer is ‘no’.

By the authors’ calculations, in 1960 a typical Indian had to toil for seven hours to put rice on the family table, while a typical American had to work for one hour to buy enough wheat. For their grandchildren in 2018 those figures had fallen to 58 minutes and 7.5 minutes respectively.
Thus in 1960 the Indian worked 7 times longer to buy food; that ratio rose to 7.7 for his grandson, suggesting that inequality has increased. But another interpretation is that the Indian gained 362 minutes a day, while the American gained a seventh of that. “Time inequality between the two has declined dramatically,” the authors judge. “When basic things get more abundant, it’s the poor who benefit the most.”

I look forward to reading the book in the future.

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