A World Without Prices in the Future? A Real Challenge Awaits Us to Make It As Fair As Possible.
The current inflation will only be temporary, while the underlying trend is towards a deflationary world.
This is the big economic news of 2022: inflation is back. Culminating in June 2022 at 8.6% over one year in Europe and at more than 9% in America, it is panicking central bankers as much as governments, and putting business leaders under pressure.
One would almost forget that only a year ago, it was its absence that was worrying: historically low prices and interest rates, maintaining a downward spiral in wages and corporate margins.
So have we moved into a new reality in a few months?
Not likely. While the inflationary surge we are experiencing is essentially linked to imported factors (rising energy and raw material costs), deflation has been a structural trend in our economies since the 1980s.
The spread of so-called information technologies, which make it possible to save human labor and materials, has triggered a cycle from which we have not yet emerged. Today, not only are the traditional drivers of price decline - population aging, and trade globalization - still in place, but the most powerful of them, namely technological progress, is following an exponential curve.
Just look at the continuous collapse of prices in the tech sector: lithium batteries cost 97% less than thirty years ago, solar panels 47% less than ten years ago... and what about the price of computers?
However, the spread of increasingly sophisticated technologies in all sectors is putting widespread pressure on the prices of many goods and services. This is what allowed Elon Musk to declare recently that we were entering “a decade of abundance” where “everything will be ridiculously cheap”.
As is often the case, Elon Musk can be criticized for not seeing beyond his doorstep, but it is true that between the launcher developed by SpaceX, which returns to earth after the launch of the rocket, and that of Ariane, costs have been drastically reduced, which allows the billionaire to think big.
Technological progress will certainly continue to bring prices down in the long term, beyond moments of economic overheating. Let us remember that the inflation rates we are experiencing today remain moderate if we compare them to those of The Glorious Thirty in France for example.
However, the speed of progress currently being made in the field of artificial intelligence, with the automation and optimization of so many processes at stake, suggests a massive technological deflation. Without going so far as to say that everything will be “ridiculously cheap” as Elon Musk may have done, more and more formerly expensive goods and services will be widely available shortly.
We can already feel the beginnings of this with Netflix or Tinder if we compare what it would cost to access the same volume of services via movie theaters, or dating clubs.
Regarding access to more essential goods, we know that artificial intelligence tools allow us to secure and increase agricultural yields while using fewer inputs. The major question posed by deflation is the end of scarcity.
This may seem strange, even contradictory, at a time when natural resources seem so fragile. But the horizon drawn by technological deflation is indeed that of a world where many things will no longer cost anything. The economist Manu Saadia has tried to project himself into this world in his book “Trekonomics: The Economics of Star Trek”, published in 2016: how does the economy of these societies of the 24th century of the Star Trek saga work, where there is no money and where a machine, the “replicator”, creates and recycles objects? How are the commons managed, and according to what criteria of social justice, in a world where the economic constraint has disappeared?
A world without prices is not necessarily a fair world, but technological progress invites us to ask these questions again and to choose what we want to value, even in a world without prices. This challenge is still ahead of us.
Some reading
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History Often Rhymes — Lessons for the US Dollar From the Collapse of the Roman Denarius. For some, America is in the midst of a modern Diocletian moment.
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Faced With Inflation, Diocletian Capped Prices Which Didn’t Prevent the Roman Empire From Collapsing. The fall of the Roman Empire was already unstoppable.