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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (263452)	5/6/2008 6:26:00 PM
From: TimF	Read Replies (3) \| Respond to of 281500

Product substitution isn't just moving to lower quality goods, because things have gotten more expensive. It includes moving to higher quality goods. It includes moving from reel to reel tape players, to cassettes, to CDs to MP3 players, to just give one example with multiple generations of changes. After each of these new products are introduced they are usually fairly expensive, than they decline greatly in price, but the official inflation statistics don't capture this reduction of price because the basket of goods is updated infrequently and the new goods aren't added until they are already fairly cheap. and concluding with the infamous "hedonic adjustment" A Model T cost $440 in 1915. A 2008 Ford Taurus costs maybe 60 times as much. Does that mean there has been 6000% inflation in car prices since 1915? Of course not. The Taurus not an equivilent good to a Model T. The hedonic adjustment is entirely appropriate. There has been a lot of inflation since 1915, your money has fallen in value, but not by 60 times.