Victor what I am trying to say is that the Basket Of Goods & Services that they use to calculate price increase is flawed because they are not comparing apples to apples.
If a computer cost $2,000 in 1995 and the price went down to $1500 in 1996 BUT the capability (ram memory, hard disk space, CPU processor speed, better graphics card, more software loaded in for free, smaller, lighter, longer lasting, bigger monitors so you can see lot better, etc.etc.), then the price of that computer has not gone down by 25%. It has probably gone down by 70%!
And it's not only tech products....almost ALL products have become BETTER because of general progress in manufacturing, design, and R&D that is applied constantly to any products/services that is being consumed today.
Think about your car today versus the car that was manufactured in 1950. There is NO comparison. They are not even comparable in terms of features, comfort, safety, durability, gas cosumption, etc.etc. The cars of today are so much superior to the cars of yesteryear so how can we simply take the price of a car and compare it from one decade to another without examining what KIND of car we are comparing. For example when the economist compares the price of a car this year versus last year, do you think they use the price of fully loaded 2002 Mercedes Benz versus the price of 2001 basic Hyundai car? That would be totally pointless as the price difference between those two cars would be over 300% -- and no sane economist would say that the car price went up by 300% using that example would they? Yet they do this all the time when calculating the CPI index! (the problem is how do you factor in the variance of value in comparing this year's goods/services versus last year's goods/services). |
