I don’t know if Team Transitory (in which I count myself, though I included Fed intervention in my expectations) gets to take home the final prize regarding inflation. Certainly the timeline was imperfect. It’s good that we’re debating who and what gets credit for a soft landing, though, since it means that Covid recovery policies haven’t likely mired us in a decade of heavy inflation (let alone hyperinflation). No, that doesn’t mean that the last round of payments wasn’t a net welfare loss, but let’s do our best to be sympathetic to the possibility that one-too-many is preferable to one-too-few when trying to bubblewrap your economy through the worst global pandemic in a century.
I bring this up because we will no doubt continue to suffer through “If inflation is under control, why is _____ so expensive” takes for a few year. I look forward to entirely ignoring these takes, with the occasional link back to this post when the commenter is sufficiently thoughtful (or annoying) to engage. And I just want to remind everyone that a lot of goods and services continue to steadily rise in price, not just because of the opportunity cost of labor (i.e. Baumol’s disease), but because of the opportunity cost of death.
We value human life more than at any previous point in human history (I haven’t consulted actuarial tables, or even googled it, but remain confident this is true). There are a lot of things we used to produce cheaply by throwing labor at the problem until it was built or everyone was dead (see Giza, the Pyramids of). You don’t have to go back nearly so far to appreciate the phenomenon.
Have you ever seen The French Connection? It has the single greatest car chase in history. It’s amazing. How did they do it? By not giving a damn about anyone or anything, including the actors in the cars and the unknowing civilians on the street. The film with arguably the greatest long-form stunt set-piece was produced for a total of $1.8 million (12.8 in 2023 dollars). Not that scene, mind you, the whole movie. It was cheap in dollars, but they had to put hundreds of people at risk to do it. Just because a miracle occurred and no one died doesn’t mean it was enormously expensive in turns of human risk (including unconsented risk).
Did you see John Wick 4? It has the best chase scene I’ve seen since the French Connection (at the Arc de Triomphe in Paris, no less). Priscillia Page, without question my single favorite film writer going these days, interviewed the director, and brilliant action movie obsessive that she is, got him to discuss in extensive detail the months of planning, the small city of professionals, and the enormous investment that went into mitigating risk at every possible turn for just that scene. All in service of John Wick driving the wrong way on the world’s most famous roundabout and then running through traffic. John Wick 4 cost $100 million to film precisely because it places so much value on every human being directly and indirectly involved.
Does anyone seriously believe movies are more expensive because of decades of inflation? Of course not. We know, at some level that the products have become more costly to produce and that that is reflected in the price facing consumers. I remain an unrepentant YIMBY who thinks that the key to the future of the US economy is lowering the costs of rebuilding our infrastructure, but we would do well to remember that the dollar costs of the past are no longer attainable because we are (gratefully) no longer comfortable throwing human suffering at a problem instead of money. This doesn’t let us off the hook from permitting, NIMBY, and public union gridlock, but we would do well endure rising costs with a bit more alacrity.
Technological innovation means the total cost of most things has gone down. That total cost includes dollars and physical risk. Our willingness to tolerate physical risk has gone down so much that, even in our world of technological miracles, there are some products that the dollar cost we are left with has gone up. But that’s not inflation. Or even a problem. It’s literally the best thing about living in the modern world.
Economist Writing Every Day 