There are some ecconomists who believe that falling prices are an inherntly bad thing. They might defend this statement by pointing out some crash and recession or depression that lasted for years and make the claim it stayed that bad because prices remained low and if we just printed more money hen they might say inflation is good as it lowers real wages as seen in articles like this (http://www.motherjones.com/kevin-drum/2012/04/why-high-inflation-good-recession). One of the arguments about deflation being a bad thing is that people will put of purchasing things and this in turn would create a situation where people are "hoarding money" and simply cease to buying anything ever again as they know could get a given product cheaper if they waited.
The problem with the fears of money hoarding is that most people call it savings and view it as a good thing. They might try to say the difference is that money hoarding is putting your money in a coffee can while savings means putting it in the bank- in view where they put the money does not matter A lot of us have change jars and we use the money for gas or getting a soda. Then we get the notion that people will put off buying things for eternity. This is simply mistaken- first there are products we buy out of necessity like food. Next our desire for something- routinely our strips our desire to save money in the future. An example here is the fact anyone is willing to buy a computer or other electronic device, because if you waited another year you'll be able to buy a better system for less than you are spending now. The computer industry didn't collapse due to constantly falling prices. This is because some times the short term benefits of a product are seen as benifical over the long term benefits of saving. In this case some one will pay $1500 for a computer not because they need that sort of a machine but because they want to play the latest video games.
So they'll use their money horde- or as I like to call it savings to buy a computer, car or what ever other product they want.
The only major difference I would expect to see in a world with falling prices over the one we have now- is people will make larger down payments and try to buy things, and be more apt to pay cash. As they would have the savings and the purchasing power of the payment will increase over time.
Then finally the last problem is that they assume that falling prices are always a bad thing and will point out depressions, recessions and economic panics as proof it must be stopped.
Prices fall because their has been an increase in supply relative to demand and this happens for one of two basic reasons- either there has been an economic crash where a lot of people have lost money making them less likely to go shopping. In this case the falling prices are the market trying to adjust to and recover from the disaster and the problem was the bubble and crash. The second reason is that new technology and good management results in prices dropping over all. This would be good thing for the over all economy. It is built on the belief that if a company can figure out away to make a product cheaper they will pass the savings to consumers as lower prices lead to more customers and higher profits.
The reason I labeled this post as price deflation instead of just deflation is because there is an older definition of deflation and inflation that relate to the money supply. The old line the more of something there is the less valuable it becomes holds true with money as well as everything else.So if the money supply grew faster than the number of goods being produced prices will increase and inversely if the number of goods being produced increased and the money supply stayed the same prices would decrease. I want to live in the second ecconomy where companies are making money by cutting prices as it is the world where you see standards of living increasing.
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