Is Deflation A Result of Exploding Global IQ?

Have just been reading more stuff about deflation in Europe, Russia and just about everywhere else, developed that is. The intelligentsia believes that it’s due to a number of factors especially the aging of the population and lack of policies to stimulate demand. Who knows, they might be right.

But I have another wild idea. That deflation is due to IQ. Lots of IQ that is. As in the global stock of intelligence. Which of course, is rising, exponentially.

Figure this; assuming an average IQ of 100, the collective IQ of the whole world was around 20 billion in 1 AD, 200 billion in 1900 and 700 billion now. But that doesn’t take into account computers and the Internet. Figure a weighting of 1000 now and 10 in 1900, that means the global functional IQ was around 2 trillion in 1900 and 700 trillion now. Or maybe a whole lot more. That’s versus a figure of 20 billion in 1 AD. (I ask respectable demographers to forgive my total desecration of the data and the meaning of IQ).

So what possible link could exist between deflation and IQ? Well as humans have become exponentially smarter they can do more and more with (relatively) less and less. So things that used to cost a lot of money now cost only a little. Things that were formerly undoable can now be done relatively cheaply –say a trip to Mars or setting up your IT system in the cloud. As human society have got sever marter, things have got ever cheaper.

Where does it all end? In runaway deflation one would surmise. Everything becomes free? Or even sellers have to pay you to buy it. Like the central banks are doing now with negative interest rates.

Do you know that human brains are getting smaller? Yep it’s true. Been an ongoing process for the last 20,000 years. No-one really knows why but the reigning hypothesis is that individuals don’t need to be as smart as they used to be since now we’ve got computers to figure out how much wheat we have planted and we can eat at MacDonaldses instead of having to kill a woolly mammoth for dinner.

Even if the brain size issue is real, the slight individual diminution of intelligence wouldn’t offset rapidly expanding populations and the geometric rise in the power of technology.

In any case, you probably know that individual IQ is increasing, by about 3 points every decade (the Flynn effect). How do you reconcile that with smaller brain size? Above my pay scale I’m afraid.

The cause of deflation matters. If it is in part due to aging populations, it can be addressed by paying people to have more babies like the European countries and Russia (not that it has made any difference so far).

But if the cause of deflation is that exploding human intelligence and technology are making things more available and cheaper then it’s a different kettle of fish. On the face of it to solve the problem we could have a nuclear war, decimate the population and blast human society back to the Stone Age (aka the Putin Plan)..

Of course, this may well happen anyway, but probably not as a voluntary or planned act. So the outlook would appear to be more of the same. That is goods and services getting even more plentiful at ever lower prices. And you paying the banks to hold your moolah.

You might counter that services delivered by human are getting more expensive. But soon humans will be obsolete in this area, replaced by robots. We are facing a dystopian future where even PhDs can’t get a job as a barista because your hamburger will be made and served by a robot.

Maybe you can defeat deflation by pump-priming and plain old fashioned money printing, like Japan and now the US and Europe are doing. But if astronomically elevated global human functional IQ is the true reason for deflation, that’s not going to do squat. Maybe that’s why Japan is still in deflation even after 25 years of monetary oriental-style QE.

It may be that the true reason for all those other global disasters like climate change, wars, ISIS, and skinny jeans is not our inherent stupidity or evilness, but just those high IQs that moms love to boast about in their kids.

Now wouldn’t that be a turn-up for the books?