One of those hot takes that I don’t think gets discussed enough:
Controlled inflation is a sign of progress.
Everyone is taught inflation is bad.
Prices go up. Your money buys less. Bad.
But I think that misses a much more interesting part of inflation.
Take a house.
Mother Nature is quite literally trying to tear down every house, every single day.
Rain. Snow. Sun. Wind. Water. Humidity. Freeze and thaw.
The roof gets older. Wood rots. Paint fades. Concrete cracks. Metal rusts.
Everything is slowly being returned to the earth.
And yet the value of a house can continue to rise.
That’s important.
Because maintaining that house requires a constant stream of new money. New roof. New paint. New windows. New equipment. New materials. New labor.
The physical asset is constantly deteriorating, while the economic value attached to it can continue moving higher.
Inflation is part of what makes that system work.
And I think you can zoom this idea out much further.
The entire economy is constantly decaying.
Roads crack.
Factories get old.
Machines break.
Software becomes obsolete.
Buildings need to be rebuilt.
Technology gets replaced.
People demand higher wages.
Everything requires more investment simply to keep going.
So an economy where prices and values never move higher isn’t necessarily the paradise people imagine it to be.
There needs to be an incentive to maintain things.
To replace things.
To build something better.
To put capital to work.
In that sense, controlled inflation can actually be a driver of progress.
Of course there is bad inflation.
Inflation caused by shortages, currency problems, excessive money creation or some sudden shock can destroy purchasing power without creating anything useful in return.
That’s completely different.
The mistake is treating all inflation as the same thing.
It isn’t.
There is inflation that makes everyone poorer.
And there is inflation that happens while wages rise, businesses expand, technology improves, assets become more productive and an economy becomes dramatically more sophisticated.
You have to learn the difference.
And there is something else I’ve always found interesting:
Some of the greatest technological progress in human history has happened during a world of persistent inflation.
That doesn’t mean inflation caused the technology.
It means our instinct that progress should make everything cheaper forever is probably incomplete.
Technology can make an individual thing cheaper while the economy surrounding it becomes vastly more valuable.
A computer gets cheaper.
The software running on it gets better.
The worker using it becomes more productive.
The company employing that worker becomes more valuable.
The building they’re sitting in becomes more expensive.
Their salary goes up.
The economy compounds.
And the nominal price of the world rises with it.
Maybe that’s the better way to think about inflation.
Not simply:
Why does everything cost more?
But:
What are we getting for the higher price?
If the answer is nothing, you probably have a problem.
If the answer is better technology, higher productivity, better infrastructure, higher wages, better products and a more capable economy, you’re looking at something very different.
Mother Nature is trying to tear everything down.
Humans keep building it back better.
That costs more every year.
And maybe that’s not a bug.
Maybe that’s progress.
Thanks to Ben Carlson’s post on X that sparked this blog post for me: