For instance: if a $2,000 computer of today is compared to a $2,000 computer of five years ago, the cost basis of the new computer will be reduced as part of the inflation calculation in order to account for the higher speed, larger memory, bigger screen, improved (bundled) software, greater energy efficiency, etc
A realistic scenario would be where a $2000 computer from 5 years ago, costs say, $1200 now. That is a 40% drop in price. That is fine, as long as the price reduction is considered to be 40% Using hedonics, that $1200 figure can be lowered to something like, say $800 or $900. But that is not the price you paid for it.
The point is that using this hedonics nonsense, you can reduce the inflation rate to anything you want. And that is just one of the many magic tricks that the BLS folks have up their sleeve. If we send these BLS bureaucrats to Zimbabwe, they will use their wide array of tricks to "reduce" the inflation rate there to, who knows, well under 10 percent?! |
