Price Stability: A Myth with No Economic Legs

The concept of 'price stability' is often touted as a desirable goal for central banks and monetary policymakers, but it's actually an unachievable and misguided objective. According to some economists, price stability is not only impossible, but it would also be undesirable.

In reality, market prices are always in balance, and rising prices in one area are matched by falling prices elsewhere. For example, the cost of Honeycrisp apples may have increased due to their newfound status as a cure for baldness, but this doesn't signal inflation, it simply means that people are shifting resources away from other goods and services.

The Federal Reserve's ability to control market prices is limited, and even if it could achieve price stability, it would likely lead to more erratic price movements due to price-compressing investment. The simple truth is that there's no such thing as price stability, and thank goodness for that, stasis is the definition of economic decline.