The Ultimate Guide to Inflation
I've wondered what the effect our modern digital economy has had on consumer price inflation.Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available.This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix subscription, it isn't like we are going to see the price of a Netflix subscription go up because there isn't enough Netflix to go around. The marginal cost for a new subscriber is practically zero, so there should be no price increase caused by a shortage.It would be easy to see that inflation would be essentially zero if ALL goods people wanted to buy were digital ones... no amount of demand can eat up the supply, since supply is practically infinite.Of course, in the real world, some goods are digital and some are physical. If you gave everyone $5000, some of that would go to Netflix subscriptions, which wouldn't effect consumer prices, and some would go to buying TVs to play Netflix on, which WOULD cause inflation.I am curious how much of our current "low inflation even with an increasing money supply" is caused by our increasing spending on non-exclusionary goods.