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To: XBrit who wrote (16994)	9/9/2000 3:26:44 PM
From: Oblomov	Read Replies (2) \| Respond to of 436258

. Government statisticians aren't that dumb, after all. This shows that Epstein misunderstands, perhaps willfully, the point being made by the detractors of hedonic adjustment. The point being made is not that government statisticians are "dumb". The point is that the adjustments are always in favor of understating inflation. Monetary policy has been increasingly politicized since 1979 or so, and to the extent that the Fed allows the "noninflationary" boom to continue, the political status quo is preserved and reinforced. That is, as long as the news from the BLS is good, the majority of people will not question the extant philosophy of government. I'm frequently told that this behavior is a function of "human nature" (though I can never seem to pin anyone down on what they mean by "human nature"). For example, no one complained about free markets when crude oil prices were at $10 per barrel. Yet now free markets appear to be problematic for the U.S. Government. I would claim that there is nothing inherently "human" about this behavior, but there is something inherently stupid and disingenuous in it.

To: XBrit who wrote (16994)	9/9/2000 3:30:35 PM
From: IceShark	Read Replies (2) \| Respond to of 436258

The Germans' findings: inconclusive and -- as nearly as I can determine (I haven't read the Bundesbank report itself) --* probably wrong. But, Grant asserts ominously, "* I will chain weight his article for that. -g- Slob reporter - a little knowledge will get you in trouble real quick.

To: XBrit who wrote (16994)	9/9/2000 5:13:01 PM
From: UnBelievable	Read Replies (1) \| Respond to of 436258

In My Experience Currency Traders Don't Care About What The Governments or the Press Says They don't even rely on "analysts". If the Dollar is up and the Euro down the reason is not because of productivity numbers or articles in Grant's, Barrons or FT. At this point the only explanation for the dollar's strength I can find is the weakness of the alternatives.

To: XBrit who wrote (16994)	9/9/2000 5:29:46 PM
From: LLCF	Read Replies (1) \| Respond to of 436258

<Ironically, hedonics has the fault of its virtues. It should have been performed years ago on other products showing significant quality improvements, like planes, trains, automobiles and TVs. > Ho ho... it is great that this debate doesn't go away... however, IMO the above sort of gets at the root: Is a guy who needs a car to get to work in 1962 vs 1995 getting much extra out of all the extra gadgets and stuff that's worth putting into the model?? Let's use some common sense, maybethe newer model is faster or he listens to the news on the radio on the newer model and saves 10 minutes with a newspaper once he gets to the office. I mean, USE YOUR HEADS! Hell 1/2 of the really huge important advances [pollution less from new models, or a happier driver due to added nice comfey upgrades] aren't measured in output stats anyway! Can't wait for Grant's rebutle. DAK

To: XBrit who wrote (16994)	9/9/2000 6:39:21 PM
From: KyrosL	Read Replies (2) \| Respond to of 436258

The gist of the Barron's article is that hedonic pricing changes reported GDP by a tiny fraction: 0.3%. Whatever one thinks of the practice, that kind of effect is rather insignificant. The Financial Times article (and James Grant) implies that the effect is a lot more significant, by prominently explaining the effect of hedonic pricing on computers, and conveniently omitting that computers represent only a small portion of the GDP and the CPI.

To: XBrit who wrote (16994)	9/9/2000 8:02:01 PM
From: Les H	Respond to of 436258

As long as they're adjusting the prices of PCs, have they also considered that technical support and extended warranties were also being priced out of the PCs? Don't they now sell these as option packages, whereas they were previously standard features. The other thing is the faster rate of depreciation of machines and their new features (read: built-in obsolesence) in each successive year.

To: XBrit who wrote (16994)	9/11/2000 10:03:38 AM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

i'll comment on this later today....

To: XBrit who wrote (16994)	9/13/2000 11:55:29 AM
From: Mike M2	Read Replies (2) \| Respond to of 436258

Julius, I have not read the Epstein article but based upon your summary he is way off in terms of the magnitude of impact hedonic pricing has on GDP and productivity growth. In his July 2000, Dr. Richebacher figures"... about 2/3 of the US economic growth of the past 4-5 years has been pure statistical fiction and 1/3 cyclical. This ,by the way, is roughly the result of new econometric investigations by Professor Robert J. Gordon of Northwestern University, a noted authority on productivity." To see the impact of hedonic pricing and chain-weighted GDP see the Dept. of Commerce " Survey of Current Business" Dr. Richebacher often features tables from this report showing the details. In his Sept. 2000 letter he shares his views on hedonic pricing " ...Who Gains? besides, we keep wondering and wondering in vain about the economic merits of productivity growth that arises from the statistical fiction of hedonic price indexing. Productivity growth has its economic essence in reducing costs per unit of output, inherently implying a corresponding rise in income, individually and nationally. According to market forces, the resulting gain in income may translate into higher wages or higher profits, but either way, somebody enjoys an increase in income. Who in America enjoys any income gain from the big rise that the statistics show in computer output and investment, as measured by the hedonic deflator? Please stand up so that we can see you." .... These hundreds of billions of dollars that the hedonic deflator calls into statistical existence have been nobody's expense and also nobody's revenue. The basic error in this statistical concept is to equate a fictitious collapse in prices with a boom in spending. The only economic effect that can be reasonably claimed is an increase in the capital stock, but that has conventionally zero bearing on GDP..." The Richebacher Letter 1217 St. Paul St Baltimore, MD 21202 . For an oppsing point of view get Luc to unban -BGR- and bring back da Cheif! -g- HO HO HO Mike