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Politics : American Presidential Politics and foreign affairs
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To: greatplains_guy who wrote (71441)3/26/2015 11:35:31 AM
From: TimF  Read Replies (1) of 71588
 
Adjusting for inflation is complex, and measuring GDP and its changes over time is imperfect in other ways besides the inflation adjustment (although that's probably the biggest problem). In some ways inflation is over estimated in others it is underestimated. There probably will never be one perfect figure because people buy a lot of goods and services, different people buy different goods and services, and those goods and services change over time.

When the change is entirely new goods and services, well then you have no past price points to compare them to. Also when they do get common enough to be added, that's typically after a massive decrease in price that never gets recorded. (Bleeding edge first adopters pay a lot, but the price drops a ton by the time most people start buying the item.)

When the change is that the "same thing" is really different (for example compare a 1980 car to a modern car), its hard to get an objective measure of the change. Any adjustment will be seen by some as fudging the stats, but if you don't make an adjustment the stats will partially mistake a change in quality as paying more for the same item.

Another point is that manufactured goods (which were a larger portion of GDP in recent decades than they are now, produce revenue from the manufacturer that was probably closer to the benefit received by the end consumer, and also probably more consistantly related to that benefit. With various benefits people can get from things like the internet both points are less likely to be held. Which is not to say that some estimate of a larger benefit should be part of GDP, but in effect real wealth, or more fuzzily "economic well being" increases faster than GDP.

Also there are negative impacts on well being (pollution being the most obvious example) that don't get measured as part of GDP (again I'm not saying they should be included in GDP stats only that they should be considered). But this might also cause change in economic well being to be underestimated since the reduced amount of pollution we now face isn't accounted for by GDP stats.
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