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For you critics of hedonic regression in the CPI....
12-20-2009, 03:27 PM
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#1
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For you critics of hedonic regression in the CPI....
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12-20-2009, 03:44 PM
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#2
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Thinks s/he gets paid by the post
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Interesting, stereo came out in 1958. I'd have guessed 1962-3.
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There are two kinds of people in the world: those who can extrapolate conclusions from insufficient data and ..
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12-20-2009, 07:23 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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It's not possible. Don't you know, everything is worse today?
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12-20-2009, 08:01 PM
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#4
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I would imagine that all of the article's examples are dwarfed by the increased cost of housing and energy to a lesser extent.
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12-20-2009, 08:21 PM
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#5
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12-20-2009, 08:50 PM
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#6
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Quote:
Originally Posted by . . . Yrs to Go
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Which is a comment on monetary policy and not the relative inflation cost of housing stock over the years. Assuming normalized interest rates, housing affordability would tell a much different story.
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12-21-2009, 05:01 AM
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#7
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That might be true, Lars, but then rising interest rates would necessarily affect house prices (reducing them) so its not particularly meaningful to normalize interest rates keeping housing prices the same.
Here's the same blogger talking about food and energy cost trends:
Long-term Lifestyle Trends Prove Positive « The Enterprise Blog
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12-21-2009, 08:02 AM
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#8
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This guy seems to like this theme. Here is another post he did elsewhere that I found when I was looking for the time cost for non-electronic goodies (can't link to image): CARPE DIEM: Time Cost of Goods: Yesterday vs. Today
The time cost for automobiles was very interesting, 4,696 hrs in 1908 vs. 1,365 today. The choice of dates seems a little odd, though, I wonder what it would be for the 1950s or 1960s.
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12-21-2009, 08:15 AM
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#9
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There's a pretty interesting disconnect between the long-term price history of discretionary "stuff" and the long-term price of essentials. Much of it reflects a long history of wages outpacing inflation for a few decades in the boom after WW2, but that train appears to have left the station.
I do expect tech to continue to get considerably cheaper in real terms, but I have a hard time seeing how the cost of household essentials like food, energy, utilities, health care and taxes can do anything but match (or exceed) wage growth overall for the foreseeable future. I hope I'm wrong, but I don't see it. Past performance is no guarantee of anything, and we're not living in the "worker utopia" of the first 2-3 decades after WW2 before global competition kicked in big time to begin changing the rules and ended the "wages beating inflation" expectation.
I'd be interested to see what would happen if the price and "hours worked for X" were plotted for the essentials, and starting from (say) the mid 1970s. I suspect the results would be drastically different than technology items plotted from the '50s.
In summary, I expect to see a continued disconnect between the price of "essential stuff" and the price of "discretionary stuff" for quite some time.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-21-2009, 08:18 AM
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#10
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Moderator
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I think part of the problem that so many people have with saving money is that there is so much more "stuff" to buy, and therefore more choices to make. For example home computers and the software to run on them didn't exist at all in the '50s. It's not hard to spend $5k+ on a high-end gaming system.
Fancy accessories for your car? No upper limit there either.
Air travel was reserved for the wealthy and adventurous. Where I grew up a trip to Disneyland was something for "rich people" and we didn't even dream of it. I've been to Disney World 5 or 6 times by now but I'll acknowledge that I didn't pay for the trips (work related) and the last two times I didn't even pay to get in the park because my nephew works there. (Then I whined about the $3.00 hamburger!)
And even with the recession I'd wager credit is still easier to get than it was in the '50s. Who had a wallet full of credit cards and the bills to match back then? Charging a trip to Hawaii on a cc was not even possible for most people.
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12-21-2009, 08:30 AM
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#11
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Quote:
Originally Posted by Walt34
Air travel was reserved for the wealthy and adventurous.
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True, and in real terms there is no question that airfares have come down sharply in the last 40-50 years.
The problem is that if one looks ONLY at the base fare for a coach ticket, and they don't account for the reduced quality of service (which has vague but very real "value" attached to it) or the increased nickel and dime taxes and fees, they are significantly overstating how much cheaper it has become. Some of the reduction in cost is offset by an increase in taxes and fees, and some of it is offset by a significant reduction in the "value added" services on a typical flight (particularly on coach). And I don't know that the CPI reflects that -- if you keep the price the same but the quality of service declines, in a very real way you're getting less value per dollar but the inflation metrics are not likely to reflect that.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-21-2009, 08:39 AM
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#12
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Quote:
Originally Posted by LARS
Assuming normalized interest rates, housing affordability would tell a much different story.
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Agreed. If we assume facts that are different than they actually are, you are entirely correct.
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12-21-2009, 08:44 AM
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#13
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Quote:
Originally Posted by . . . Yrs to Go
Agreed. If we assume facts that are different than they actually are, you are entirely correct.
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Facts or a cherrypicked subset of facts that skew the overall picture of how things actually have gone recently?
For sure, the price of a lot of stuff has gone down, but only showing the most extreme examples in the tech area is, IMO, definitely cherrypicking.
And what the price of TVs has done in the last 50 years (or computers in the last 25) has very little to do with the price of food, energy and health care relative to wages in recent times.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-21-2009, 08:49 AM
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#14
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If you guys want to see some real debates on the validity of the CPI, here are 39 threads on the subject in our FAQ section dating back several years.
Have fun!
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Numbers is hard
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12-21-2009, 08:52 AM
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#15
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Quote:
Originally Posted by ziggy29
I'd be interested to see what would happen if the price and "hours worked for X" were plotted for the essentials, and starting from (say) the mid 1970s. I suspect the results would be drastically different than technology items plotted from the '50s.
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See chart at bottom . . .
Despite Higher Food Prices, Percent of U.S. Income Spent on Food Remains Constant - Amber Waves September 2008
The reality is that productivity makes things cheaper, especially commodity products like agriculture. Our farmers are way more efficient today than they were in the 70's. With continuing improvements in biotechnology there is no reason to think that progress will stop.
What I wonder, though, is why so many people are convinced that things were better in decades past when so much of the evidence points to the contrary?
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12-21-2009, 08:57 AM
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#16
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Quote:
Originally Posted by REWahoo
If you guys want to see some real debates on the validity of the CPI, here are 39 threads on the subject in our FAQ section dating back several years.
Have fun!
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I especially like this one.
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12-21-2009, 09:01 AM
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#17
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Quote:
Originally Posted by ziggy29
There's a pretty interesting disconnect between the long-term price history of discretionary "stuff" and the long-term price of essentials. Much of it reflects a long history of wages outpacing inflation for a few decades in the boom after WW2, but that train appears to have left the station.
I do expect tech to continue to get considerably cheaper in real terms, but I have a hard time seeing how the cost of household essentials like food, energy, utilities, health care and taxes can do anything but match (or exceed) wage growth overall for the foreseeable future. I hope I'm wrong, but I don't see it. Past performance is no guarantee of anything, and we're not living in the "worker utopia" of the first 2-3 decades after WW2 before global competition kicked in big time to begin changing the rules and ended the "wages beating inflation" expectation.
I'd be interested to see what would happen if the price and "hours worked for X" were plotted for the essentials, and starting from (say) the mid 1970s. I suspect the results would be drastically different than technology items plotted from the '50s.
In summary, I expect to see a continued disconnect between the price of "essential stuff" and the price of "discretionary stuff" for quite some time.
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Maybe you could define "essentials". Housing is certainly an essential, but what kind of house? My folks, living in the "worker utopia" of the 1950's, raised three kids in a house with a 24' x 26' footprint. No air conditioning, no garage, one bathroom.
Maybe I'm misunderstanding your post. I think the ordinary person has a much higher material standard of living today than they did 50 years ago. But, it's just a little better than 25 years ago. I don't expect a lot of improvement in the next 25 years, but I don't expect us to regress to the 1950's either.
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12-21-2009, 09:05 AM
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#18
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Quote:
Originally Posted by Independent
Maybe you could define "essentials". Housing is certainly an essential, but what kind of house? My folks, living in the "worker utopia" of the 1950's, raised three kids in a house with a 24' x 26' footprint. No air conditioning, no garage, one bathroom.
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Uh, I *did* define "essentials." To wit, straight from the snippet you quoted:
Quote:
but I have a hard time seeing how the cost of household essentials like food, energy, utilities, health care and taxes can do anything but match (or exceed) wage growth overall for the foreseeable future.
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__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-21-2009, 09:14 AM
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#19
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True, airfares have recently undergone pricing scheme shenanigans that make it difficult to do comparisons, but some of that is economics and a lot of it has to do with taxation being directly passed on straight to the consumer and labeled as such. The fees for luggage, pillows and food goodies is just some silliness that airlines have come up with to confuse the consumer. Some of it is also due to our demand for air travel at cheaper prices and the natural regression toward decreased services to meet that expectation. When you expect to fly for Greyhound prices, you can expect a Greyhound experience.
I think that technology has not only brought prices down in terms of hours of labor needed to purchase good and services, but has dramatically increased what we get for the money. Remember when there were actual seasons for most of the produce in the grocery store? If it wasn't grape season, you weren't getting any grapes. Now, I can buy grapes year round because technology has improved harvesting, processing and transportation so that I can access markets in places like Chile and find grapes in the produce section practically year round. Shrimp? Who cares if there is a season, because I can access farm raised shrimp, or shrimp imported from Vietnam.
Taxes present an interesting question, and the first thing that leapt into my mind is what capabilities are we expecting and receiving for our tax money as compared to 30 years ago. And how has technology improved what we get?
I remember 30 years ago having a training officer who was obsessed with finding stolen cars driving down the road. He had a special way of folding the daily "hot-sheet" (list of recently stolen cars by license plate) and held it in his hand the entire shift while constantly reading license plates. We never found one in the 30-days I rode with him. Within 10-years most police cars had data terminals that allowed him to check well-beyond the limitations of the hot-sheet and even expanded his abilities to check for wanted cars, suspicious cars, and wanted persons associated with certain cars.
Now, 30-years later, look at the capabilities he would have (he's retired now)- 1,500 license plates checked per minute:
EDIT: As a result of improvements brought by technology that make cars harder to steal and easier to recovery, auto theft rates are at a 20-year low.
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There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
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12-21-2009, 09:17 AM
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#20
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Quote:
Originally Posted by Independent
Maybe you could define "essentials". Housing is certainly an essential, but what kind of house? My folks, living in the "worker utopia" of the 1950's, raised three kids in a house with a 24' x 26' footprint. No air conditioning, no garage, one bathroom.
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And it's not just bigger houses. We're eating more too.
So this chart shows US food expenditures declining as a % of income from 1970 to present.
While this one shows us eating 16% more per-capita than we did in the 1970's.
So we're paying much less, to eat much more. I think that is the primary source of all of the claims about rampant inflation, particularly those who try to calculate a rate of "Personal Inflation". People consume tons more of everything today and wonder why they are paying more for it.
So the solution to this "rampant" personal inflation is pretty simple. Just push the plate away fatty.
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