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To: Victor Lazlo who wrote (104850)	6/11/2000 1:08:00 PM
From: Skeeter Bug	Respond to of 164684

victor, hedonic pricing currently inflates gdp, and therefore productivity, growth by 100%. you say it is erroneous. i agree. i don't see how that makes me off. it does make alan.com off, though, since he is a BIG proponent of hedonic pricing and currently incorporates it into gdp growth calculation and enjoys the fact it overstates real economic productivity by 100%. as for productivity, the us govt's methods are probably wrong. adjusting them up by 100% through a method we both agree is false, and nobody can argue is economic, more than makes up for any potential shortfall in poor techniques, imho. in fact, the govt has a vested self interest to INFLATE productivity and keep this BUBBLE inflated. after all, al gore is running on IT'S THE ECONOMY, STUPID. as for inflation being overestimated, i disagree. first, the govt has a vested self interest to under-represent it b/c it reduces govt payouts. while this doesn't prove anything, it does show a MASSIVE economic reason not to wantonly overstate inflation. the proof that inflation is understated is in the fact that asset inflation, growing at about 10-20% per year, is not included. neither is oil when when the price goes up - i read an article where oil was excluded earier this year b/c its price went up. the system the govt uses is to reduce the "basket" weightings if prices go up. the principle is that folks will substitute. that deflates inflation using an entirely suspect (clearly false to me) methodolgy. in addition, if prices go up, they account for a portion of the increase as an improvement in "quality." this, again, deflates inflation. funny, they don't account for "quality" drops when consumers substitute for items when prices go up ;-) the facts: 1. govt has an economic self interest to over report productivity and keep the economic (statistical!!!) "miracle" alive - along with excessive cap gains tax inflows - MAXIMIZE MONETARY INFLOWS AND POLITICAL CLOUT. 2. govt has an economic self interest to underreport inflation to minimize social security payments - MINIMIZE MONETARY OUTFLOWS. 3. every change to productivity measurement in the last 5 years has INCREASED the number. 4. every change to inflation measurement in the last 5 years has DECREASED the number. i think the motivation is obvious and the methodolgy used clearly exposes why the numbers are false and the that productivity is grossly overstated and inflation is grossly understated.