Kurzweil Prediction #9: Deflation

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“Accelerating returns from the advance of computer technology have resulted in continued economic expansion. Price deflation, which had been a reality in the computer field during the twentieth century, is now occurring outside the computer field during the twentieth century, is now occurring outside the computer field. The reason for this is that virtually all economic sectors are deeply affected by the accelerating improvement in the price performance of computing.”

This prediction is a tough one to evaluate. Let’s break into two parts: 1) continued economic expansion driven by computer technology and 2) deflation driven by computer technology. On the first count, there has certainly been world-wide economic expansion in the decade, particularly in emerging economies. And, of course, some of this expansion has been driven by the computer. However, It it seems a bit hyperbolic to claim that this expansion is actually dominantly from the computer. Besides, in the countries where computers are most prevalent, growth during the previous decade was actually a bit slow compared with emerging markets. I think we’d have to conclude that point #1 is largely false.

On his second point, it is once again hard to evaluate. Certainly, commodities other than computers show some deflation, but that has been true for a long time (the amount of grain produced per acre has been declining for decades if not centuries, the cost of electricity, the cost to move a car 1 mile, etc.) It doesn’t appear that we are seeing tremendous deflation.

It is easy to see how these two parts of this prediction could be made when Kurzweil was writing in 1998. We had a rapidly growing economy due to the Internet’s surge in the US and there was talk of technology prompted deflation. But both trends basically fizzled out during the subsequent decade.

I think we have to call this one false.

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