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To: patron_anejo_por_favor who wrote (17974)	9/13/2000 12:30:55 PM
From: LLCF	Read Replies (1) \| Respond to of 436258

<It would be one thing if you could actually buy and use the stuff now rendered obsolete by the "newer and better" at those low, low prices...but, in most cases you can't, and that is where hedonic pricing misses the mark badly, IMO.> You know these hedonic price adjusters are just way too close to the situation in any case... anyone sitting back in their 'Adarondack Chair of Life' and pondering the larger issues, instead of firing off a couple of quick paragraphs to meet this weeks Barron's issue deadline, can see that this is classic 'forest through the trees' stuff. The number crunchers on the front lines grind away attempting to measure incremental increases in product value while ignoring wide swaths of value changes elsewhere in the economy. Moles toil in their caves unaware of or purposefully ignoring changes in the quality of life which dwarf the value of a microprocessor to the individual. While obese 5 year olds wolf down processed food and inhale toxins many times higher than 30 years ago at daycare because both parents are working, the moles are measuring the increased value over last year of the new T.V. the couple just purchased. The moles would no doubt declare todays food supply itself superior by many times over that same time period because of increased shelf life, pretty packaging, and other 'conveniences'... must I go on? When will the moles start measuring the 'big picture'? DAK

To: patron_anejo_por_favor who wrote (17974)	9/13/2000 12:32:35 PM
From: Mike M2	Respond to of 436258

Patron, I may not recall the figures correctly but I saw a documentary of Ford's Model T the time required to build a T went from 13 hours to 1.5 and yet the price dropped from $ 800 to under$300. Hedonic pricing corrupts the data so a vaild comparison over time or between nations is impossible. In his Sept 2000 letter, Dr. Richebacher also says " According to the measurement practiced in the German GDP statistics, computer prices have fallen by 20% altogther since 1991 . By the measurement practiced in the United States, they have fallen 26% a year fro the past five years. Official statistics for the United States show an average annual increase in business expenditures on computer equipment per year by 40% since 1991 as against only 6% in Germany. Using, the American deflator, however, the average annaul increase would have been 27.5% for the whole period. As the divergence in the deflators is rapidly compounding over time, the divergence in measure output follows suit.Numbers get more and more absurd. Just think of what we mentioned earlier: fixed nonresidential investment, of which 75% is 'hedonised' new high tech, have accounted for 55% of U.S. real GDP growth in the first half of 2000. In other words, the hedonic deflator has come to represent the most powerful factor behind the seemingly miraculous growth of U.S. GDP and productivity. " The Richebacher Letter 1217 St. Paul St Baltimore, MD 21202 Note: Reproduction in part PERMITTED if source and address are stated. mike