Hi,
I’m looking for the best definition of deflation. I’m not sure which of the is more correct. Are they all correct?
I look forward to your feedback.
davidmich
" deflation is a decrease in the general price level of goods and services."
"Deflation is a decrease in the total volume of money and credit. "
"Deflation is a decrease in the money supply which results in prices going down.
“According to Investorwords.com the definition of Deflation is “a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. The opposite of inflation.”
“In that the cause of price deflation (falling prices) can be monetary deflation (a decrease in the money supply) but there can be other causes as well.”…Although the above definition is basically true it confuses cause and effect. In that the cause of price deflation (falling prices) can be monetary deflation (a decrease in the money supply) but there can be other causes as well. And the effects are different depending on the cause.”
" deflation is a decrease in the general price level of goods and services." is the best definition of the four. Two of the others say this, but then elaborate about the causes or imply a cause. That isn’t part of the definition.
" deflation is a decrease in the general price level of goods and services." is simply wrong as a definition of deflation. It might be a cause of deflation, but it is not what deflation is.
Old Guy.You say that “deflation is a decrease in the general price level of goods and services.” is simply wrong as a definition of deflation." So what is the best definition of deflation in your opinion?
davidmich
davidmich, you’ve asked a form of this question before. The answer is the same:
Deflation as the word is typically used is just negative inflation. It’s when the general price level is dropping instead of rising. To say it again: There is no dispute here. The correct definition is the one professionals actually use around the world.
There are some ignorant people out in the world who are in denial about this. They are best ignored, but since a sufficient number of them infest the internet, they can sometimes poison discussions with their nonsense, and you might be curious where this stupendous error comes from.
In the past, inflation was defined as an increase in the supply of money. People had noted the relationship between more money and an increase in the price level, and so people spoke of an inflated supply of money driving the process. (This meant that in the past, “deflation” was a decrease in the supply of money.) Over time, people realized that that there were many possible definitions of “money”, and that the price level did not perfectly correlate with the increase in any of them, at least not over the short term. The Quantity Theory of money is a highly imperfect way to study prices over short time periods, and prices are what we care more directly about. Because money can be so hard to define, economists started focusing on changes in prices. Because prices get much more attention, it didn’t take long for the term “inflation” to be shifted to changes in the price level. (This means that “deflation” is a decrease in the general price level. Deflation is just negative inflation.)
This shift in meaning is complete now. Deflation is negative inflation. Deflation is a general decrease in the price level. This is the meaning that professionals worldwide use. If you use an out-of-date definition, you will exclude yourself from that conversation.
You keep running into silly alternate definitions because ignorant people tend to fall into the etymological fallacy. They believe that since the word “inflation” (and therefore “deflation”) meant something different in the decades before they were born, it should still hold that meaning today. Call it a form of economic prescriptivism. Like the majority of prescriptivists, they are simply wrong.
A domain name doesn’t mean anything. Anybody can get a domain.
In one of the other cites you strangely provided, you’ve quoted some idiot who wrote into a newspaper. And that’s not my personal evaluation. Even the columnist said the guy’s ideas were “idiotic”.
Nothing has changed from the last time you asked this question about inflation. Deflation is just the other side of the coin. The definition is crystal clear. Deflation is a drop in the general price level. Anyone who says different would rather muddy the discussion than communicate clearly.
Old Guy directly contradicts himself, probably due to an error in copying and pasting phrases from your OP. I am reasonably confident that what he meant to say in his second paragraph was
Its probably wrong to start mentioning any cause since there is no cause, it never happens, or if it did happen, you might have some other more profound cause…
“The government nationalised all industry and fixed all prices”… Then you’d need a cause for that… so drop the causation …