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Comment by patio11 | Hacker News Reader

I think just about everything in this article is accurate, but that it ultimately doesn't matter, because the particular class of goods that are subject to this is rounding error on an economic sector which, if you compared it to e.g. fixed income securities, would resemble a pimple on the nose of a particular emperor depicted on one coin of the vast horde that a dragon sleeps on.

Here's an interesting experiment for you: guess what portion of the US economy is video games, movies, music, and consumer Internet services put together. Now graph that against "Of the last 20 people you talked to, how many are white men between the ages of 12 and 24?" I think that graph shows a markedly upward slope. I also think that it does not asymptotically approach the right answer.

You could do a spiritually similar experiment with, e.g., cosmetics/beauty aids, wedding services, etc and young ladies. Or healthcare, if you're looking for a gigantic underestimation.

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It's a small fraction of the real economy, but a large and growing fraction of waking hours. It's hard to measure the consumer surplus created by high-quality entertainment, but it's clearly enormous if people are willing to devote multiple hours per day to TV (or, if they're in the demographic you mentioned, games and the Internet).

If that activity is <.25% of GDP and ~5% of waking hours, it might imply that our measurements are out of whack, not that it's insignificant.

Plus! The rise of online dating might cut into the cosmetics market, by reducing the necessary baseline of attractiveness. If people meet their mates when they're standing in line at the grocery store, looking good in the grocery store has a direct, positive impact on lifetime happiness. If people meet their mates on OKCupid, it's okay not to care too much about personal appearance at other times.

Fulfilling psychological and social needs are a huge part of the consumer economy. bigger houses , branded cars and brands in general , going to pubs and restaurants and vacations , everything that has to do with design.And entertainment. all those are there to fulfill psychological and social needs.

The web offers a cheap alternative , that's rapidly improving(google+ hangouts for example), for fulfilling psychological and social needs.

It would be informative to see a pie chart of the US economy, broken down by sector. Unfortunately, I'm at work, and don't have the disposable time to concoct such an interesting diagram...

Just increasing energy, raw material, food, etc. costs increasing can produce net inflation, even if everything else gets progressively cheaper due to automation, scale, and computers.

Energy hasn't been increasing in cost ( not even gasoline in the US, really - although it's a messy dataset ). Raw materials and food are "marginally free" - it almost costs more to figure out how much more you need than to produce it, so long as there is no speculative run on the commodity.

The Internet (apparently) produces much more consumer surplus than it sinks in cost. I'd say it's deflationary because:

1) 1980s models of radio are completely infeasible. 2) 1980s models of television programming are pure-cost infeasible. 3) Cable TV is dependent on movie-replacement shows like "Breaking Bad" and sports. 4) There's a strong probability that theater-movies will follow the same curve as CD sales did with Napster, and soon.

The only things that are not essentially deflationary are housing, education, government and healthcare. Housing might be teetering on the brink of deflation. Education... who knows? And healthcare is likely to see something like deflation as status-oriented (read customer-perception quality stuff) gets squeezed out.

Government? Who knows?

Gas is over $4 per gallon, and people drive longer distances due to housing issues and the decline of public transportation. I drop $100 every time I go to whole foods, and I go a few times a week.

Gas was $1-2 per gal until fairly recently (a few years ago), and food has gone up in both price and demanded quality.

2001-2007 was the majority of the increase, but that is due to the recession 2008-2011 and ongoing, at least outside tech.

I agree the big commodity bubble was a bit of an exception, but if you took away the recession, headline inflation, if not core, would be way up.

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