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To: flatsville who wrote (66616)	2/10/2001 3:03:20 PM
From: Ilaine	Read Replies (1) \| Respond to of 436258

I wish you would tell me why you think that Congress requires the BLS to use hedonic price adjustment or regression analysis using hedonics. I don't think Congress even enacted the recommendations in the report from the Boskin Commission. I don't think Congress tells the BLS how to calculate the CPI at all. I think that members of the Senate Financing Committee sent letters to the BLS asking them to respond to the recommendations contained in the report from the Boskin Commission. The BLS agreed with some of the recommendations and not with the others. gao.gov If you can provide me with a citation in the US Code or any other place where Congress adopted or enacted a requirement that the BLS use hedonic price adjustment or regression analysis using hedonics, or even follow the recommendations of the Boskin Commission, please do so. I have looked and haven't found any. It's not in the US Code, which is where laws are codified. It's not in the Code of Federal Regulations, which applies to agencies. In fact, if you can give me a citation which indicates that Congress tells the BLS how to calculate the CPI, that would at least be a starting point. The Bureau of Labor Statistics, after all, is under the aegis of the Secretary of Labor, which is part of the Executive Branch (President). Parenthetically, one interesting thing I've noticed while researching this issue is that hedonic pricing so far is only applied to apparel, computers and peripherals, some major appliances, one segment of housing, audio equipment, and a few other things, and apparently only affects a tiny fraction of the CPI. So I don't really understand why you and Magner are making such a big deal out of it.

To: flatsville who wrote (66616)	2/11/2001 10:11:27 AM
From: Mike M2	Read Replies (1) \| Respond to of 436258

Flats, I have pointed out before that there are two separate issues with respect to the use of hedonics. I see the Boskin commission recommendations as a cover story to slow the growth of entitlements but understating product price inflation as computed by the BLS. To the extent that product price inflation is understated real growth and productivity is overstated. The major factor which overstates growth and productivity is the Commerce Deptartments use of hedonics when computing Chain Weigthed GDP versus current dollars. Take a look at The Survey of Current Business or the Grandfather Economic Report Homepage the impact is huge. For example in 1998 investment spending in chained dollars increased by $137 billion but in current dollars actual spending was up $14 billion. The difference between the two has no economic relevance because it is a measure of dollars that were never spent. IMO the only reason for this practice is to overstate growth and productivity in an effort perpetuate the new era myth and support the bubble. Mike