They were.
Who cares if anyone actually wants a 5lbs nail, Stalin says make 100,000 tons of nails, and this is the quickest way...
100,000 tons of nails is a lot of wealth.
Production in and of itself doesn't guarantee wealth because there is no guarantee people want what you're producing. If they don't, you're actually destroying wealth by committing resources to less desired uses.
I understand your confusion now. 100,000 tons of nails is a lot of wealth, but Stalin should have sold the iron and coal he wasted to make the nails instead. He could have used the proceeds to buy 200,000 tons of nails.
In his case, the coal and iron ore represented more wealth than the nails he produced. Production. Of ore and coal.
Computer prices dropped faster than that, yet production, contrary to your understanding, increased every year.
Did computer prices drop because of deflation or because of improvements in technology?
You should check your premises.
Has home building increased or decreased since prices have dropped?
Will you buy a new house if you know the price will drop 3% a year, forever? Will the bank give you a mortgage?
Holy smokes, I've found a Soviet propagandist Freeper?!
While their people starved the bureaucrats struggled to meet Stalin's arbitrary (as they were not rooted in supply and demand) needs any way they could. The 5lbs nails that no one could use is just one example. For GDP counters like Krugman it might be perceived as wealth, but to society it was a drain.
100,000 tons of nails is a lot of wealth.
Not if you don't have any use for a 5lbs nail it isn't, it is a waste of all the resources and effort squandered creating them.
Did computer prices drop because of deflation or because of improvements in technology?
Doesn't matter, you said, "If you think production will increase if prices across the board are guaranteed to drop 3% a year, every year, you're confused.". People will invest when they perceive an imbalance of supply and demand sufficient to create a profit, whether prices are rising or dropping.
Has home building increased or decreased since prices have dropped?
Decreased, because of oversupply, yet even house building hasn't stopped. In fact, even in this environment people still see an opportunity to profit by investing in the creation of new housing units.
Will you buy a new house if you know the price will drop 3% a year, forever? Will the bank give you a mortgage?
Sure, I bought a house last February in fact, and I'll have it paid off in less than 7 years, after which time I'll still have a roof over my family's head (provided I keep up with ~$200/mo property taxes). The house has utility to me, and the bank providing the mortgage knew the price of the house wasn't dropping to zero because it has utility to others as well.