Economic theory challenges the pursuit of stable prices

An analysis of the historical pursuit of stable prices suggests that the drive for price stability by central banks and economists may have hindered rising living standards. The text argues that increased productivity naturally tends to lower prices, which benefits consumers by increasing the purchasing power of money.

Historically, proponents of price stability, including Irving Fisher and John Maynard Keynes, focused on preventing falling prices during economic busts. These economists viewed falling prices as a primary cause of depressions, leading to the use of monetary policy by central banks to prop up price levels. However, the text suggests that such interventions can prevent the distribution of the fruits of free enterprise to the public.