Is there a long-run deflationary trend right now?

Although the cited source says as much, please don't take these remarks as my dismissal of the relevance of AD cyclical macro.  Still, I find this idea intriguing:

Anyone who still thinks falling prices are a cyclical phenomenon isn’t looking closely. It’s secular, and the sudden ubiquity of discount outfits shows how Japanese consumption has become a race to the bottom of the pricing spectrum.

There is more detail here and note the trend is occurring even though Japan does not have declining real per capita income. 

In a wide variety of areas, ranging from ethnic food vs. fine dining to blogs vs. books to the art world (Outsider Art is often more visceral and enduring) to clothing, there is a common realization going on: cheap stuff is often better than the more expensive stuff.  Furthermore, information technology allows you to reframe your consumption, countersignal your personal image, and reaffiliate with others, and their social movements, in ways which increase the status value of the lower priced goods.  It is now quite easy to find the (possibly) small pool of people who will respect you for your cheap hobby or obsession.  You can buy obscure items and even your uninformed friends can Google to find out what they are and why some people think they have value.  In relative terms, a famous, mainstream, and somewhat upper-class "Nordstrom" label is worth less than before.

These developments remove or at least limit the status-based reasons for buying the higher-priced goods.

Mike Munger took us all for pupusas and we loved it; no one was bitching about the absence of seared tuna.


Comments for this post are closed