Warning this is a long post and it recaps much of what has been said. I do it in an effort to not allow Mish to recharacterize this debate into something it hasn't been. If you don't want to read a rehash of this debate, please just pass on by this post.
Mish:
Every attempt by me to steer this debate back to some sort of neutral ground has been rebuffed. You have gone well out of your way to say point blank that I am full of shit in those words and I can only conclude that you have temporarily lost your head and intend to continue to do so, ignoring simple logical explanations that anyone should be able to understand.
Let's recap this OK:
[because of something weird with SI's posting, I had to put all of the links at the end of the post, I refer to them sequentially using R1 as the starting number]
Start of “debate” with Mish declaring:
I do not believe anyone that says living expenses are up 50% in 4 years. Prove it, and start with your mortgage or rent. (See R1 for link)
Inflation would have to be an average of 10.67% per year for a 50% increase in 4 years.
To which I responded with my first post on this topic:
(See R2 for link)
In which I relate my personal experience with inflation and quantifying it at somewhere in the 8-11% per annum range over that period.
This post Mish did not respond to, but chose to come round about by posting his thoughts to a third party here:
(See R3 for link)
In which he first displays his ignorance of how to compare prices for inflationary relevance by comparing the cost of his buying food and cooking his own meals at home to someone who eats in restaurants.
But anyone complaining about restuarant prices or the price of insurance for a hummer is likely to get no sympathy from me.
To which I reply here:
(See R4 for link)
Lifestyle choices have an impact on the amount of expenditures, it's true. But I thought the question related more to whether or not for the same lifestyle one was experiencing rising prices. Apparently I misread that as it appears to be less about inflation and more one of how best to live below ones means.
By which I imply for the first of many times that likes have to be compared to likes, at the time an apparently novel concept and one that is difficult for him to grasp, because in his response to me here:
(See R5 for link)
He continues to go off on the “people living beyond their means should have to pay for it" riff:
Unfortunately the problem is living on the edge as in buying more car than one can afford, more house than one can afford, more everything than one can afford has permeated everywhere. It's as if everyone thought (or acted)as if gasoline, heating bills, insurance etc etc would never go up. Well they have and unfortunately wages have not kept up except for those at the top end.
To which I respond by trying to drive the conversation back to what his original thesis was, that of whether or not people were experiencing higher inflation.
(See R6 for link)
Why not use the same basket of goods as was used in the 1940s, 1950s and 1960s? Isn't it really about comparing the prices for the same goods over time? Screw hedonic adjustments, let's just have a basket who contents can be compared across periods while keeping the value of the currency also at a constant.
To which he responds with strawman argument of:
That is the fallacy of your argument as well as those that claim the dollar has lost 99% of its value or whatever.
Now did I even mention anything at all about the value of the dollar having dropped in any of the preceding? No!
But he hits on his real resistance to measuring inflation in one all-to-fleeting statement of clarity:
IMO people are brainwashed to believe inflation is a measures of prices rather than a measure of money. This is by design as it conviently lets the government and the FED off the hook.
Fancy that, brainwashed to believe inflation is a measure of prices! How could I possibly come to that conclusion when gasoline goes from $1.00 to $2.50 in 4 years? Medical costs climb well into the double digits every year and the insurance premiums reflect it. Housing goes through the roof. Services of all types that can’t be outsourced to India climb to recover their higher costs. Brainwashed by reality!
In the same post he admits that hedonics make price comparisons across time more difficult but blames everything but the hedonics themselves:
I will tell you that Price inflation is most assuredly understated but by an amount that is impossible to measure because of hedonics, new products, and the impossibility of picking a "representative basket" of goods, services and EQUITIES to measure.
Impossible to measure if you eliminate every attempt because you only want to measure money flow, but not very impossible to the average schmoo on the street!
In this post I give my simplified definition of inflation:
(See R7 for link)
Inflation is a change in prices, don't over-think it. It may usually be caused by over printing money and/or over extending credit, but not always. When living through historic times it can be the "not always" qualifier that holds the keep to more timely understanding of things economic
I also state, for the record, why I believe one can compare similar cars across time:
You get real! A new car today is just as spiffy for the person buying it as a new car of yesteryear. You talk about people being brainwashed and yet you buy into this hedonic crap like it was the second Coming! A new car is a new car. Yes the bells and whistles are different today than they were 30 years ago and, yes, they will be different 30 years from now, so what? Its primary purpose hasn't changed and the rest is all fluff. Compare "standardly equipped" to "standardly equipped" in constant dollars. The hedonics are invaluable for confusing the issues and that's part of their purpose.
To which you reply in a way that just magnifies the impression that you are (up to this point) clueless about how to compare likes to like for inflation measurement purposes:
(See R8 for link)
If a new car is a new car then buy a Hundai for $11,000 and your cost just went way down. All the rest is Fluff? OK for the sake of argument I agree you are 100% correct. So Buy a Hundai or a Toyota, pay less and your price dropped.
The very first sentence out of your mouth in response! Clueless! And I called you on it in a later post.
You continue to display your ignorance of comparative measurement with this gem:
I ahave already sdaid I believe the CPI is understated. What more do you want me to say? Medical expenses have gone thru the roof as have energy costs. Both of those are seriously unerstated in the CPI. But... By your own measures, a lot of what people are griping about is "fluff". Your word not mine.
I believe I have proven that a lot of people do not know how to shop for food on sale. Logic also dictates that anyone that bought a house 5 years ago and refinanced at a lower rate had their actual housing costs GO DOWN.
You are claiming here that inflation does not exist if one were simply to “shop right” Clearly clueless about the difference between measuring inflation and staying within a budget. Refinancing a house says nothing about the value of the house between financings, a point apparently still just beyond your reach by this post.
You also give us another glimpse of how emotional this inflation debate is for you with this statement:
But I dismiss someone telling me that on "average" the CPI has gone up 10% a year for 5 years. No freaking way in hell unless someone has really unusual experiences.
Here’s where I busted you on your Hyundai “logic”
(See R9 for link)
What the heck kind of argument is that? My price dropped compared to what? What I could have purchased a Hyundai for 10 years ago? You are still embedding in your paradigm that everyone who experiences higher inflation than you is merely buying more expensive stuff than you. Get your head out of your paradigm and think logically! Geezus lad, you're putting yourself on the national stage, you've just got to think more clearly than that if you want it to be more than your 15 minutes of fame!
Now you start getting squirrely on me:
(See R10 for link)
You repeat this statement which I have shown above to be of your origin:
If a new car is a new car then buy a Hundai for $11,000 and your cost just went way down. All the rest is Fluff? OK for the sake of argument I agree you are 100% correct. So Buy a Hundai or a Toyota, pay less and your price dropped.
And tell me that this is my argument!!!!!!
Timba that was not my argument it was yours.
I do NOT think a car is a car is a car.
YOU said that not me.
And then follow it up with gems like:
A new car is NOT a new car.
IF a new car was a new car then everyone would buy the cheapest car they could get.
Again, apparently still struggling with the simple concept of comparing a new low priced Ford with a new low priced Ford across time.
But it appears to me that you have suddenly begun to audition for the job of a Bush speech writer with gems like this:
I do not believe "a car is a car" nor do I believe "a window is a window", nor do I believe "a house is a house".
These and other Mish-gems are going to be saved, they are just priceless.
You can not say that inflation represents the cost of my house vs my dad's house. That is preposterous
Is another gem from that post. I think you turn around and say something different in a later post though.
You finally do “get” part of the math though, when you say:
In order to have an accurate price comparison, prices simply MUST compare equals
But then two sentences later you blow that hard-won credibility by saying:
Using your car analogy, if a house is a house, I will trade you dad's house for whatever house you are living in, sight unseen. A house is not a house, and a car is not a car.
Proving once again that you don’t grasp that a 700 sq ft house is not a valid comparison against a different, larger house in another part of the country.
Here you go with a key assertion of your paradigm:
As for hedonics, they MUST be factored in. That is in fact where the problem comes in. I believe quality improvements are generally overstated.
They may be important to you in some academic sense Mish, but the guy who wants to buy the cheapest new Ford out there may not really want to pay for all of those “improvements” but has no choice. Forced increase in cost should not then be backed out because some economist thinks it is a benefit. “Let’s pretend” pricing is ludicrous.
At any rate, I hope this is a better worded description of the point I was trying to make, and it also shows how difficult it is to compare prices over time because exact equivalants are hard to find.
No Mish, more words is not equated with clearer thinking. There are no “exact equivalents” in life. A tomato is not molecularly identical to any other tomato to prove that point. You are just toying with what level of equivalence is “OK” for you. I believe there are reasonable equivalents in goods and services: The price of the same meal at the same restaurant over time; a new low-priced Ford to a new low-priced Ford; groceries of equal weight; the same house at different times; etc. You don’t believe these things. That doesn’t make you right, nor does it make me right.
You begin to try to take the high ground here:
(See R11 for link)
by saying:
Timba I am not sure if you are being purposely dense or what but it is beyond silly to compare a model T from 1920 to the cheapest Ford today.
Which I suppose you mean to imply that the 1920 version wasn’t able to get me from point A to point B, but the newer version was, I don’t know. But the 1920 model was new in 1920 and cost hard-earned money to buy, a 2006 would be new now and it costs hard-earned money to buy. Find a similar comparison and roll with it is what I say. By similar I mean if the 1920 Model T was a middle of road (pricing wise) new vehicle then compare it to a middle of the road vehicle today. A reasonable comparison, I’d say. At least as reasonable as trying to pick apart the components of each and relative ease or difficulty to produce, etc. etc. For all of your displayed indignation, you have yet to show me the validity of your assumptions that hedonic adjustment reflect a truer picture of cost comparisons than the much simpler model I’ve proposed.
And, Mish, before you go getting all tongue-tied on me again, go to the Fed sites, they have excellent papers on hedonics. Using one of those arguments will at least make you sound better.
Comparing the price of a chicken to 40 years ago makes perfect sense. So does comparing a ton of copper or a pound of sifted flour. You are attempting to compare oranges to asteroids. That is how far off base you are.
OK wise guy, why does the price of chicken compare favorably? Aren’t there medical improvements that make the survivor rates higher today than yesteryear? How about hormones that make them plumper? Genetics that make them produce bigger and better eggs?
You see, Mish, with just a little bit of effort I can come up with lots of reasons why you can’t compare one to the other. All I have to do is add Hedonics!!!!
This hedonic crap can be used to keep inflation in prices from ever being quantified and that is exactly why it was developed. You’ve bought into it hook, line and sinker. In my opinion, that is probably because you never wanted price comparisons over time to work out because it would sometimes conflict with your monetary and credit biases. But that is just my opinion.
To continue this little travelogue to its most recent postings:
After all of the above the Mishter continues down the squirrely lane with this:
(See R12 for link)
NOW after tons of nonsense it seems you want to compare a chicken to a chicken or the EXACT same house from 10 years ago to the EXACT same house today.
Mish, I haven’t changed one iota through this whole debate.
But you have the chutzpa to end the post with:
It seems you finally agree with me.
I’ve mentioned this Mish a few times in the past and I think it appropriate to mention it again: You need to take a break man, your losing it.
I say that because in this post you say:
I would have thought were were in agreement but I have not changed my stance one bit. A house is not a house and a car is not a car, but a 3 lb chicken is a 3 lb chicken
And later when I point it out to you, you see nothing wrong with it. Makes perfect sense to you.
Later in that post you end it with this:
If you believe the statement above as I quoted you, not only do you want to discount quality improvemnts you also want to discount the enormous increase in material components that go into today's cars.
Actually, are you sure that there are really enormous increases in material components? How do you measure that: Are today’s cars lighter or heavier? Would you rather be in an accident in a 1954 Ford or a 2006 Ford? Would you rather do a tune-up yourself on a panhead or today’s engines? You are assuming that because you can think of differences in cars that that somehow negates the price differential between a new low-priced car today and a similar one of yesteryear. You are entitled to your opinion Mish, but that is all it is, an opinion.
The implications should be obvious to everyone given that I explained the above in great detail. I will attempt again to ignore your attacks but I am not sure how much longer I can take total nonsense.
I’m sure that you can "take it" for just slightly shorter in time than you can dish out total nonsense. You’ve used a lot of words Mish, presented a lot of opinions, but have offered not one iota of proof that your methodology is worth any more than anyone elses. You call anyone else's arguments total nonesense but get huffy when the same phrases are used to describe yours. You believe your position to be the best one, and that’s good for you, but just your own belief doesn’t make you correct. Until you can show me that your measures of inflation are more accurate than the ones I’ve proposed and until you can delineate where your cut-off for hedonic adjustments is, all you have is a theory and one that doesn’t seem to hold up very well to challenges.
R1--http://tinyurl.com/op5kq
R2--http://tinyurl.com/leore
R3--http://tinyurl.com/ql5oo
R4--http://tinyurl.com/nwl3l
R5--http://tinyurl.com/mt5gs
R6--http://tinyurl.com/lnso4
R7--http://tinyurl.com/qql9z
R8--http://tinyurl.com/ogyo3
R9--http://tinyurl.com/qu9le
R10--http://tinyurl.com/oq2np
R11--http://tinyurl.com/p7m59
R12--http://tinyurl.com/nn25f |
