Thoughts on Tech, Deals, and Markets

Is Deflation Really That Bad?

with one comment

BusinessWeek has an article on the popularity of netbooks.

In accord with the laws of technology, today you can buy more tech with less dollars.  Tomorrow, inevitably, your money will go even further in tech.   Isn’t that–dare I say it–deflation?

Wait a sec.  I thought deflation was the boogeyman.  It ruined Japan in the 90’s.  But what about in tech?  With netbooks, high-functioning machines are available for $300. Same as with every tech product, both B2B and B2C.  Large screen TV’s prices are in freefall, online classified ads are free to publish, it takes a few bucks to start an Internet business, etc. Why don’t tech buyers hoard their money and wait for tomorrow to spend?  Their tech dollars will be worth a lot more.   But obviously that doesn’t happen.  Even in this dismal economy, people are still buying iPhones and video games even though they could get more value buying in the future.  At least in technology, no, deflation really isn’t that bad.

Written by sandykory

January 8, 2009 at 2:21 pm

One Response

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  1. I’m no expert but it seems worth considering that there may in fact be specific reasons that buyers purchase technology today knowing that prices will decrease in the future (and then seeing if those arguments would hold true for say, shoes).

    An economist might argue that the reason people buy technology is that the opportunity cost of not buying it today would outweigh the value of deferring the purchase. This is certainly an argument that doesn’t hold true for large classes of consumer goods. I’d argue that even large swaths of consumer discretionary technology purchases will be deferred on this basis.

    ShyamS

    January 10, 2009 at 8:18 pm


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