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My limited understanding of inflation calculations is that this should result in a increase in inflation as we're getting less product for the same price. I re

My limited understanding of inflation calculations is that this should result in a increase in inflation as we're getting less product for the same price. I read a long time ago about some quirks of the inflation calculations: Say 27" TVs are part of the basket of products, but it's no longer so easy to buy a 27" TV, so they pick up the next size up, say 32" and the price is the same as for 27" but because this is a better TV (bigger for sure), it is deemed that the price of TVs have fallen as your buck can buy more TV. I would dearly love for somebody with knowledge of the subject to confirm/deny/clarify the above

chii 7y ago
> quirks of the inflation calculations it's correct - improvements to tech is considered this way as well. I personally don't believe this is a good measure.
jnty 7y ago
I don't understand how the situation above is a 'quirk' and not a straightforward example of deflation. The price of a typical TV - now represented in the basket of goods as a 32in TV - has fallen. The fact that lower prices might lead people to buy larger TVs is no more surprising than a fall in the price of meat leading people to buy more steak.
- reallydontask 7y ago
  The price is the same, it has not fallen. You get a bigger TV for the same price but this is not the same thing as a lower price for the same TV, which is what most people would recognise as lower inflation. That's why I said it was a quirk
  - jnty 7y ago
    The price of a 32in TV has presumably gone down though right? And the same would surely be true of a 29in TV if you could find one. The fact that the market has moved on and you have to tweak your basket of goods is a measurement quirk, not a definition issue. It's not very different to finding out you can buy a 12-pack for as much as a 6-pack used to cost. Also deflation.
SuoDuanDao 7y ago
Eric Weinstein, physicist, economist, and podcaster has referred to a pretty nasty fight he and his wife had about this very thing - I believe he calls it the problem of hedonic substitution, and he and his wife had come up with a theory that could model it rigorously (gauge theory) but as far as I know he's never discussed gauge theory for laypeople. here's a clip from an interview where he discusses the subject: https://www.youtube.com/watch?v=2xiEEtoa-_4 https://www.youtube.com/watch?v=2xiEEtoa-_4 Edit: I realize I worded that misleadingly - he and his wife were on the same side, against government economists who wanted to be able to estimate the value of hedonic substitution on an ad-hoc basis.
- adrianN 7y ago
  Gauge theory is already a thing in physics. Maybe he should come up with a different name?
  - SuoDuanDao 7y ago
    My understanding is that his innovation was applying gauge theory to calculating the 'real' rate of inflation. But the only academic talk of his I've seen assumed a base level of knowledge which I don't have.
- vincent-toups 7y ago
  This clip. Christ. There are many ways for the conversation to go if you want to get try an understanding of gauge theory. Joe Rogan is not on any of those many branching paths.
gnode 7y ago
Inflation is typically measured by the price of a basket of goods and services designed to be representative of what is actually consumed. If the shrinking or growing of offerings simply changes what is consumed, then there is no real inflation change. What is measured depends on the definition of the basket of goods (does it contain "Mars bar" or "62.5g of chocolate bar"). The definitions of baskets of goods used to measure inflation tend to be changed over time to represent changes in consumption, such as 27" TV to 32" like you mention. As the 32" TV would be more expensive, this would create sudden inflation, however, this is diluted by the large size of the basket. The quantity or size of the product is not important for measuring inflation, unless it creates a change in consumption. E.g. do people now buy two chocolate bars to sate their appetite? Do people buy fewer TVs because a TV of twice the areal size can substitute two smaller TVs?

chii 7y ago

> quirks of the inflation calculations it's correct - improvements to tech is considered this way as well. I personally don't believe this is a good measure.

jnty 7y ago

I don't understand how the situation above is a 'quirk' and not a straightforward example of deflation. The price of a typical TV - now represented in the basket of goods as a 32in TV - has fallen. The fact that lower prices might lead people to buy larger TVs is no more surprising than a fall in the price of meat leading people to buy more steak.

reallydontask 7y ago
The price is the same, it has not fallen. You get a bigger TV for the same price but this is not the same thing as a lower price for the same TV, which is what most people would recognise as lower inflation. That's why I said it was a quirk
- jnty 7y ago
  The price of a 32in TV has presumably gone down though right? And the same would surely be true of a 29in TV if you could find one. The fact that the market has moved on and you have to tweak your basket of goods is a measurement quirk, not a definition issue. It's not very different to finding out you can buy a 12-pack for as much as a 6-pack used to cost. Also deflation.

SuoDuanDao 7y ago

Eric Weinstein, physicist, economist, and podcaster has referred to a pretty nasty fight he and his wife had about this very thing - I believe he calls it the problem of hedonic substitution, and he and his wife had come up with a theory that could model it rigorously (gauge theory) but as far as I know he's never discussed gauge theory for laypeople. here's a clip from an interview where he discusses the subject: https://www.youtube.com/watch?v=2xiEEtoa-_4 https://www.youtube.com/watch?v=2xiEEtoa-_4 Edit: I realize I worded that misleadingly - he and his wife were on the same side, against government economists who wanted to be able to estimate the value of hedonic substitution on an ad-hoc basis.

adrianN 7y ago
Gauge theory is already a thing in physics. Maybe he should come up with a different name?
- SuoDuanDao 7y ago
  My understanding is that his innovation was applying gauge theory to calculating the 'real' rate of inflation. But the only academic talk of his I've seen assumed a base level of knowledge which I don't have.
vincent-toups 7y ago
This clip. Christ. There are many ways for the conversation to go if you want to get try an understanding of gauge theory. Joe Rogan is not on any of those many branching paths.

gnode 7y ago

Inflation is typically measured by the price of a basket of goods and services designed to be representative of what is actually consumed. If the shrinking or growing of offerings simply changes what is consumed, then there is no real inflation change. What is measured depends on the definition of the basket of goods (does it contain "Mars bar" or "62.5g of chocolate bar"). The definitions of baskets of goods used to measure inflation tend to be changed over time to represent changes in consumption, such as 27" TV to 32" like you mention. As the 32" TV would be more expensive, this would create sudden inflation, however, this is diluted by the large size of the basket. The quantity or size of the product is not important for measuring inflation, unless it creates a change in consumption. E.g. do people now buy two chocolate bars to sate their appetite? Do people buy fewer TVs because a TV of twice the areal size can substitute two smaller TVs?