<It makes much more sense when you are trying to look at CPI, which has always been a "market basket" approach. If in year 1980 the market basket includes a microwave oven - to use a less emotionally laden example than computers - which costs $500, how do you compare a microwave oven bought in 2000? The new one will probably be much bigger, more powerful, with additional features like a rotating plate on the floor, and will still be cheaper, maybe $200. But to be meaningful, you'd have to somehow compare a 2000 microwave that is just as small, just as weak, and just as featureless as the 1980 model, just to get at the most basic price differential. >
Great examples... yes a "market basket"... what market basket? A market basket of what one needs I suppose? Or and average market basket. OK, but Coby, this basket has been changing for centuries, so what? Do we want to know the price of the basket of what one 'needs' or not?? With hedonics as the basket 'gets better'... we artificially [arbitrarily at best since it's truly impossible to know these numbers] move the price down to compare it with past baskets?? Why? Answer... so we can claim "real" vs nominal inflation... I just don't think it makes sense, since people feel real.
DAK |
