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I think there are many reasons to be skeptical of inflation and productivity statistics because they don’t seem to capture the rate of innovation in consumer go

I think there are many reasons to be skeptical of inflation and productivity statistics because they don’t seem to capture the rate of innovation in consumer goods such as smartphones and related areas like wireless plans. I wrote a piece on inflation statistics showing how U.S. inflation statistics fail to account for the quality improvement in iPhones: https://medium.com/@vince.pavlish/using-iphone-prices-to-check-the-accuracy-of-inflation-statistics-4140d65ac252?source=linkShare-acc967f91527-1530458838 https://medium.com/@vince.pavlish/using-iphone-prices-to-che...

mdorazio 8y ago
While that might be true, it seems like incorrectly accounting for quality improvements in a subset of goods is a rather small nitpick in comparison to things like poor accounting for rapid changes in housing, healthcare, education, and child care costs in many locations. PCE is a better measure of inflation than CPI in my opinion, and even that is lacking.
- GatorD42 8y ago
  The CPI shows higher inflation than the PCE, which would seem to contradict your claim that PCE is better measure for capturing those categories. Given the large errors I have observed in measurement of electronics and wireless plans (biased towards overstating inflation) it wouldn’t necessarily surprise me if the CPI or PCE erred in measuring the prices of housing, healthcare etc in the opposite direction (biased towards understating inflation). That said, the whole point of such measures is to record the prices of these services over time, and the measurement seems much more straightforward than for personal electronic devices(no need to account for large quality changes or changing product categories except in medicine). So if the CPI were mismeasuring such areas, it would be a fairly embarrassing mistake.
  - mdorazio 8y ago
    I made no claim that PCE is better at capturing those categories; only that it is a better method overall than CPI. Both indexes take into account tuition, for example, but not student loan obligations, which are absolutely massive in comparison to things like electronics and wireless plan obligations. The same is true for medical expenditures, but not medical debt. And of course a huge issue is that any national measure of inflation is not accurate for people who live in places outside the median, such as cities in California where rising costs of living routinely push local CPI increases far beyond national levels (BLS does provide more local numbers, but they're rarely discussed). I don't doubt that your data is correct, I just don't think it's very important in the scope of the overall contributing factors to real-world inflation for most people.
bitbckt 8y ago
This issue is one of the subtexts in Gordon’s “The Rise and Fall of American Growth”.
nabla9 8y ago
There are independent measures besides official CPI numbers. For example MIT's Billion Prices Project. These alternatives measures show that CPI is doing pretty good job. http://www.thebillionpricesproject.com http://www.thebillionpricesproject.com
- GatorD42 8y ago
  My argument isn't that the CPI is misleading mismeasuring prices, but falling to amount for quality improvements in products. I'm not sure the MIT data disproves that claim.
  - nabla9 8y ago
    When economists want to track quality changes they typically use hedonic models like hedonic regression or sales adjustment grids. In the U.S CPI calculation uses hedonic adjustment in many item categories, including smartphones. Bringing up quality when talking about wages does not seem relevant. Wages are important relative to the size fo the economy because they turn into consumption. CPI tracks that just fine. When trying to estimate economic growth quality may be more important.
xapata 8y ago
I don't believe your assumptions: fashion and marketing matter. Contrarians often claim "the old version was better!" It's not clear that more features is a substantial quality improvement.
extralego 8y ago
They should at least factor in how thin the MacBook Pro has gotten.
tfehring 8y ago
Interesting take, but I'm not sure I buy it. I certainly don't feel like I get ~2.5x more utility from my current iPhone than I did from the smartphone I purchased in 2012, which was just as fast (on the software of the time) and had most of the same functionality. I'd also be curious as to how you were able to conclude that the so-called "fashion effect" is not supported by evidence.
- madengr 8y ago
  Things have gotten worse in some respects. Computers get more and more locked down with corporate security bullshit, it becomes harder to get any work done. Remember when you could quickly FTP a file, toss up a web page, email someone a zipped file. Can’t do any of that now without jumping through hoops. Computers have become very slow for tasks that used to be fast. Everyone always seems to “waiting on the computer”; that’s screwed up. It should be the other way around.
  - noonespecial 8y ago
    >Remember when you could quickly FTP a file, toss up a web page, email someone a zipped file. Can’t do any of that now without jumping through hoops. Oh I remember all right. I've spent weeks of my life yelling into a phone "no PASV. You have to find where it says PASV and check it" Toss up a web page? On what, Geocities? (back to the ftp thing are we?) Email a file? Great. I hope its less than 2mb or it might just vanish somewhere along the way... Dropbox. Wordpress. Slack. This stuff is 100x better for the average user than a decade ago. 1000x better than 2 decades ago. The real trouble is all of this means just about nothing when you're afraid to go to the doctor because your deductible is more than a decent used car.
- GatorD42 8y ago
  How much would you pay for a brand new iPhone 5 (the iPhone new in 2012) that looked exactly like an iPhone X and was indistinguishable by anyone else? If it's less than the price you would pay for a real iPhone X that price difference is because of quality improvement and not fashion. There are more rigorous ways to account for the fashion effect, but this thought experiment shouldshow that a significant part of the price difference is because of quality improvements.
phkahler 8y ago
My phone has the capability of a billion dollars worth of super computers back in the 1980s. Its not sensible to assign any economic value to that. I'm not richer because I have better technology today than before. Trasistors have just suffered massive commoditization and their prices reflect that.
- dominotw 8y ago
  > I'm not richer because I have better technology today than before. Why not though?
  - gedy 8y ago
    Probably because it does not translate into food, health, and shelter security for the vast majority of people.
    - dominotw 8y ago
      sure if you don't have those already, I am sure gp does have food, healthcare. I was curious if better tech makes your richer if you already have food, healthcare, security covered. Richer doesn't necessarily mean we have more food than before.
      - CamTin 8y ago
        It should mean that we have better security in all of those things. Any increase in "wealth" that doesn't actually make us better off in the sense that we are less likely to lack necessary things like food, healthcare, and shelter is not really a kind of wealth worth having. All but the most very very rich people in the US are just a couple bad breaks away from homelessness, poverty, and lack of reasonable health insurance. It's better elsewhere but the safety net is not immutable and many many people want to dismantle it for shallow political reasons.
  - deleted 8y ago
    [deleted]
- 8y ago
criddell 8y ago
I think we're past peak phone. I don't care about improvements in my phone anymore, I just want security patches. The fact that the phone is getting better is uninteresting to me. You might as well tell my new lawnmowers are better.

mdorazio 8y ago

While that might be true, it seems like incorrectly accounting for quality improvements in a subset of goods is a rather small nitpick in comparison to things like poor accounting for rapid changes in housing, healthcare, education, and child care costs in many locations. PCE is a better measure of inflation than CPI in my opinion, and even that is lacking.

GatorD42 8y ago
The CPI shows higher inflation than the PCE, which would seem to contradict your claim that PCE is better measure for capturing those categories. Given the large errors I have observed in measurement of electronics and wireless plans (biased towards overstating inflation) it wouldn’t necessarily surprise me if the CPI or PCE erred in measuring the prices of housing, healthcare etc in the opposite direction (biased towards understating inflation). That said, the whole point of such measures is to record the prices of these services over time, and the measurement seems much more straightforward than for personal electronic devices(no need to account for large quality changes or changing product categories except in medicine). So if the CPI were mismeasuring such areas, it would be a fairly embarrassing mistake.
- mdorazio 8y ago
  I made no claim that PCE is better at capturing those categories; only that it is a better method overall than CPI. Both indexes take into account tuition, for example, but not student loan obligations, which are absolutely massive in comparison to things like electronics and wireless plan obligations. The same is true for medical expenditures, but not medical debt. And of course a huge issue is that any national measure of inflation is not accurate for people who live in places outside the median, such as cities in California where rising costs of living routinely push local CPI increases far beyond national levels (BLS does provide more local numbers, but they're rarely discussed). I don't doubt that your data is correct, I just don't think it's very important in the scope of the overall contributing factors to real-world inflation for most people.

bitbckt 8y ago

This issue is one of the subtexts in Gordon’s “The Rise and Fall of American Growth”.

nabla9 8y ago

There are independent measures besides official CPI numbers. For example MIT's Billion Prices Project. These alternatives measures show that CPI is doing pretty good job. http://www.thebillionpricesproject.com http://www.thebillionpricesproject.com

GatorD42 8y ago
My argument isn't that the CPI is misleading mismeasuring prices, but falling to amount for quality improvements in products. I'm not sure the MIT data disproves that claim.
- nabla9 8y ago
  When economists want to track quality changes they typically use hedonic models like hedonic regression or sales adjustment grids. In the U.S CPI calculation uses hedonic adjustment in many item categories, including smartphones. Bringing up quality when talking about wages does not seem relevant. Wages are important relative to the size fo the economy because they turn into consumption. CPI tracks that just fine. When trying to estimate economic growth quality may be more important.

xapata 8y ago

I don't believe your assumptions: fashion and marketing matter. Contrarians often claim "the old version was better!" It's not clear that more features is a substantial quality improvement.

extralego 8y ago

They should at least factor in how thin the MacBook Pro has gotten.

tfehring 8y ago

Interesting take, but I'm not sure I buy it. I certainly don't feel like I get ~2.5x more utility from my current iPhone than I did from the smartphone I purchased in 2012, which was just as fast (on the software of the time) and had most of the same functionality. I'd also be curious as to how you were able to conclude that the so-called "fashion effect" is not supported by evidence.

madengr 8y ago
Things have gotten worse in some respects. Computers get more and more locked down with corporate security bullshit, it becomes harder to get any work done. Remember when you could quickly FTP a file, toss up a web page, email someone a zipped file. Can’t do any of that now without jumping through hoops. Computers have become very slow for tasks that used to be fast. Everyone always seems to “waiting on the computer”; that’s screwed up. It should be the other way around.
- noonespecial 8y ago
  >Remember when you could quickly FTP a file, toss up a web page, email someone a zipped file. Can’t do any of that now without jumping through hoops. Oh I remember all right. I've spent weeks of my life yelling into a phone "no PASV. You have to find where it says PASV and check it" Toss up a web page? On what, Geocities? (back to the ftp thing are we?) Email a file? Great. I hope its less than 2mb or it might just vanish somewhere along the way... Dropbox. Wordpress. Slack. This stuff is 100x better for the average user than a decade ago. 1000x better than 2 decades ago. The real trouble is all of this means just about nothing when you're afraid to go to the doctor because your deductible is more than a decent used car.
GatorD42 8y ago
How much would you pay for a brand new iPhone 5 (the iPhone new in 2012) that looked exactly like an iPhone X and was indistinguishable by anyone else? If it's less than the price you would pay for a real iPhone X that price difference is because of quality improvement and not fashion. There are more rigorous ways to account for the fashion effect, but this thought experiment shouldshow that a significant part of the price difference is because of quality improvements.

phkahler 8y ago

My phone has the capability of a billion dollars worth of super computers back in the 1980s. Its not sensible to assign any economic value to that. I'm not richer because I have better technology today than before. Trasistors have just suffered massive commoditization and their prices reflect that.

dominotw 8y ago
> I'm not richer because I have better technology today than before. Why not though?
- gedy 8y ago
  Probably because it does not translate into food, health, and shelter security for the vast majority of people.
  - dominotw 8y ago
    sure if you don't have those already, I am sure gp does have food, healthcare. I was curious if better tech makes your richer if you already have food, healthcare, security covered. Richer doesn't necessarily mean we have more food than before.
    - CamTin 8y ago
      It should mean that we have better security in all of those things. Any increase in "wealth" that doesn't actually make us better off in the sense that we are less likely to lack necessary things like food, healthcare, and shelter is not really a kind of wealth worth having. All but the most very very rich people in the US are just a couple bad breaks away from homelessness, poverty, and lack of reasonable health insurance. It's better elsewhere but the safety net is not immutable and many many people want to dismantle it for shallow political reasons.
- deleted 8y ago
  [deleted]
8y ago

criddell 8y ago

I think we're past peak phone. I don't care about improvements in my phone anymore, I just want security patches. The fact that the phone is getting better is uninteresting to me. You might as well tell my new lawnmowers are better.