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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: regli who wrote (56592)	3/23/2006 1:35:30 AM
From: mishedlo	Respond to of 110194

I am questioning what hedonics is really trying to address. Is the objective to measure utility or productivity? If it is then in the case of a car, don't we also have to consider the state of roads, i.e. congestion? Obviously a car's utility despite its latest snazzy features is greatly impaired in stop and go traffic. Without a clear and stated objective that can be reasonably measured, it is obvious to me that hedonics and substitution will be severely abused. Of course it will be abused. It is being abused now. This administration (like every other one that preceded it) uses hedonics to hold down the CPI so as to pay as little as possible to SS and other COLAs. The discussion came about in an attempt to figure out what "price inflation" really is and I think the CPI is understated but not by as much as some people think. I do think quality improvements should be factored in, I recall John saying something to that effect about housing, yet others think that quality should not be taken into consideration at all and that the price of a car today can be compared to the price of a car of 1924. That is when it all went totally off the deep end. I guess I should have never embarked down this path in the first place since I believe (as does Saville, Heinz, and Austrians in general) that the problem is money and credit growth not prices per se. This board has proven that people can not even agree as to whether or not to measure quality, let alone trying to decide how to measure quality it it needed to be done. Is it any wonder that people have widely different views as to how much prices have gone up? Mish