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Strategies & Market Trends : The Millennium Crash -- Ignore unavailable to you. Want to Upgrade?

To: WTSherman who wrote (5223)	6/7/2000 11:36:00 AM
From: pater tenebrarum	Read Replies (1) \| Respond to of 5676

WTS, sure, on the face of it, hedonic pricing has a certain logic to it. the problem is, that the criteria underlying the methodology are highly subjective. like SB has pointed out, there's a difference between the micro and macro level. essentially what the government is doing, is incorporating anecdotal micro level evidence into macro level economic data. on the macro level, measuring productivity, inflation and GDP growth should be a matter of real, objective output data. it simply makes no sense to transform $8,6 bn. in computer hardware investment growth into an incredible $148 bn. when measured using the government's methodology (the example from '98 GDP). obviously the distortion is so big as to fly in the face of common sense. imo one of the reasons why government is employing this method is to cut down on cost-of-living-adjusted expenses. in the case of inflation data, the statistical methods employed are even more prone to distortions due to geometric weighting. in essence, perfect substitution is assumed in these figures. meaning that when the price of gasoline goes up while the price of turnips is falling, BLS assumes that you're not driving as much but eat more turnips instead. the effect of this is to understate true CPI inflation, as in reality this assumption is simply wrong. more later, regards, hb

To: WTSherman who wrote (5223)	6/7/2000 11:41:00 AM
From: Haim R. Branisteanu	Respond to of 5676

WTSherman, unfortunate your SUV example is one that the government is not discounting as a regular car. Actually the SUV's are increasing the GDP per the Government statistics and that is exactly the point for excess....... instead of a regular car they drive to the mall by a more expensive SUV. Efficency of people tasks or no inflation is out of the window as it is more expensive to fetch your groceries ...... more wear and tear, depreciation and gas. BWDIK Haim Haim

To: WTSherman who wrote (5223)	6/14/2000 11:33:00 AM
From: Mike M2	Respond to of 5676

WT, one very significant point is that to the best of my knowledge no other nation on earth uses hedonic pricing for chain-weighted GDP. When you strip out the distortion created by hedonic pricing the productivity miracle is greatly diminished. In addition, I think we can all agree that to make a relevant comparison between past new eras Us in the 20s and Japan in the 80s the methodology should be the same. If memory serves corporate profits peaked in 3Q 97 based upon National income and product accounts - basically pretax profits - a nice way to eliminate much of the prolific accounting gimmickery. Mike