Friday, December 19, 2008

An Economic Paranoia Trap

Here's an interesting problem for social scientists over the coming month: the economy is driven, at least partly, by consumer confidence. Most news shows lately have run stories about the surprising downside of falling prices. Deflation is a sign of an ailing economy!

True enough, because it cuts into profit margins and encourages people to wait on their purchases until the price drops farther.

What I'm worried about though is the normal drop of price from after-christmas sales. Some people are going to factor it in, but won't it freak out a lot of consumers to see those deep discounts? Won't it look like a sign of the economic apocalypse, which therefore causes itself? Keep an eye out for that one.

1 comment:

Publius said...

I think an even BIGGER challenge for social "scientists" is to prove that what they do IS science in the first place, instead of the kitchey Bull Carp it really is!