Technology drives deflation because productivity growth reduces marginal costs to zero, making goods and services increasingly abundant and accessible; this effect will accelerate with AI, where the marginal cost of producing code that creates other code is zero, leading to continuous improvement and free access to better models.
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Jeff Booth: Why Technology Is Deflationary, Especially in the Age of AIAñadido:
So the natural state of a free market is deflation. The natural state of the free market is productivity growth which causes prices to fall. Massive competition from the free market drives prices to the marginal cost of production. Then you'd have to ask what's the marginal cost of production of a line of code? It's zero. And the follow on question where we're going with AI is what's the marginal cost of production of a line of code creating other lines of code?
Zero. So AI will be free everywhere and every day you're seeing better and better models like every day better and better models.
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