There is another explanation and this is a THEORY only: we are in a 25 year deflation caused by massive, truly revolutionary productivity growth via computers that still has yet to even be appreciated, let alone valued in.
This deflation was further exacerbated by the housing crash. But that didn’t change the underlying factor that computers have changed productivity rates in ways that economists still cannot even count.
Just one little example. A guy named Bhide did a book called the “Venturesome Economy” a few years ago. He noted almost in passing that corporate R&D is down, but that in fact they can’t keep up with the new developments. Bhide found that in tech areas, companies have basically “farmed out” much of their former R&D to the consumer, and that all they do now is listen to consumers for what new apps they want and then immediately address those.
Take an iPhone: prior to the 1970s, the “normal” way to measure the value increase would be to compare an older phone to a newer phone. That worked well until phones stopped being phones and became phones, computers, GPS systems, gaming systems, cameras, datebooks, e-mail, computers, and on and on. To truly capture the value increase, one would have to track every single one of those functions to its original iteration, THEN find a way to bundle all that productivity increase into a single device.
This is in part (not entirely) what is behind so much of the unemployment. We haven’t yet “re-purposed” the employees who previously worked in many of these tasks. I’m not saying we don’t need to build cars and make textiles. I am saying that the tech changes in all these things have not been properly monetized. Just a theory.
bttt
Other than the book that you mention, has this theory found an outlet for public consumption? University papers? Online discussions? Obscure Web sites? Anything at all?
Believe me - I'd really like to know!
Thanks!
CA....