In their recent Wall Street Journal essay, George Gilder and Gale Pooley called for a “time-price index, or TPI.” They crucially reminded readers that “while we buy things with money, we actually pay for them with our time—not in dollars and cents but in hours and minutes of work.”
Gilder and Pooley’s argument is that CPI as a measure of prices confuses the issue, and gives the surely false impression that prices are always rising. In truth, and measured in the amount of time we work in return for money that exchanges for market goods, the price of everything is in rapid decline. It’s so true. We work to get, and the getting requires fewer and fewer minutes and hours of work.
Knowing this, Gilder and Pooley call for a rethink of how inflation is measured. Once again, prices measured in work are going down. Rapidly. About what they assert, there’s no argument with placing time prices on everything as Pooley and Cato’s Marian Tupy did in their essential book, Superabundance.
Just the same, the view here is that it would be dangerous to replace TPI with the surely errant CPI as a measure of inflation. Instead, replace both. TPI, like CPI, imagines that inflation is about prices of market goods. Neither is, which is why both present problems when it comes to measuring actual inflation.
To say that rising prices cause inflation is like saying suntans cause the sun. Yet CPI has long tried to measure inflation with market prices. That’s why it’s never been accurate. Figure that economics is about tradeoffs as is, which means a rising price logically signals a falling price elsewhere. Throw in from there that prices rise for all sorts of reasons unrelated to inflation (think the lockdowns in 2020-21 that eviscerated global cooperation on the way to reduced productivity), and it’s simple to say that CPI on its best day measures the effects of inflation. Nothing else.
Of course, the causes of rising or falling prices also show why time prices are a brilliant insight into the economy, but decidedly not a useful measure of inflation. Think the lockdowns again. What fractures the division of labor across hands and machines by definition results in rising prices. Except command-and-control is not inflation.
Conversely, growth in the division of labor among man and machine as previously described is the biggest instigator of rapidly falling prices, by far. Whether it's nominal prices as measured by CPI or time prices (TPI), easily the most powerful force pushing down prices is labor division. What’s important about labor division is that its fruits have nothing to do with deflation. Economics is yet again about tradeoffs. If the supercomputer in our pocket costs less and less in dollars and time, then we have more dollars and “time” to exchange for other goods and services formerly out of reach.
Which brings us to inflation. It’s one thing, a shrinkage of the exchange medium in terms of something known to be stable. Gold has long served as the objective measure indicating an expanding or shrinking monetary measure. TPI won’t replace gold, rather its begs for its revival as the truth-teller about inflation.
Seriously, stop and think what the TPI will register if money is trusted, and is subsequently reoriented away from inflation hedges representing existing wealth in favor of equity return streams representing the creation of future wealth. The result will be plummeting prices in dollars and TPI that will make the present appear deprived by comparison. In other words, for TPI to fulfill its genius, money must be money again.
