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Is that graph saying cars stayed the exact same price in dollars even with 56% inflation? That doesn't make sense to me.

nimos 5y ago
Yup. Welcome to the wild wild west of hedonic adjustment. Things like side impact airbags and rear view cameras basically give the BLS unlimited power to drive down inflation.
- standeven 5y ago
  I don't believe new or used vehicle purchases qualify for hedonic adjustments. https://www.bls.gov/cpi/quality-adjustment/home.htm https://www.bls.gov/cpi/quality-adjustment/home.htm
  - nimos 5y ago
    Cars fall under cost based adjustments. This is the most recent (AFAIK) document the BLS has published: https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf It's not entirely an unfair point in the sense clearly a modern car with modern safety and electronics costs more to produce (hence the cost basis). But as far as I know the BLS is basically given free reign to invent the cost basis.
runeks 5y ago
Bear in mind that the chart covers a 20-year period. A 56% rise in prices over 20 years is 2.25% per year. Why doesn't it make sense to you that this particular basket of goods can rise in price, on average, 2.25% pear year while individual goods in the basket can either fall in price or rise much faster?
- Thorrez 5y ago
  The reason I find that confusing is that cars keep getting new safety standards, emissions standards, fuel economy standards. Adding those new features isn't free. But somehow cars managed to decrease in price in inflation-adjusted dollars. Have there been significant technological advances that would allow car prices to decrease in inflation-adjusted dollars? Additionally, from my own point of view, it doesn't feel to me car prices dropped in inflation-adjusted dollars. This could be a mistaken feeling though. This graph seems to say cars increased in dollars pretty steadily from 2014 to 2021: https://wolfstreet.com/2021/05/27/the-whole-mindset-has-changed-consumers-are-willing-to-pay-a-lot-more-for-cars-and-trucks-generating-record-sales-gross-profits/ https://wolfstreet.com/2021/05/27/the-whole-mindset-has-chan... Maybe that's just people switching from sedans to SUVs though. That could also be responsible for my feeling of the inflation-adjusted price not changing, if I was looking at sedans in the past but SUVs now.
  - garmaine 5y ago
    They haven’t decreased in price. The feds instead say, essentially, “hybrid cars and airbags didn’t exist when this metric was invented, so to compare apples to apples we’ll guess at what a 1960’s car would cost if it were made today today” and then invents a number.
    - rsj_hn 5y ago
      A better description of what they do is to make a list of the features that car Modern has and car Old doesn't. Say the airbag. Or anti-lock breaks. Then they look at how much it costs car Modern to add the airbag, using manufacturer's cost of producing that feature. Or how much it costs to have anti-lock breaks. Then they subtract that from the price of car Modern to try to get an apple to apple baseline of how much it would take to produce car Modern without the feature. Note that this process is not a hedonic adjustment, it's a production cost adjustment, which is what is used to deflate the price of cars.
      - garmaine 5y ago
        It’s not how costs and prices work though.
    - Thorrez 5y ago
      Then nimos's second link is pretty useless to me. I want to know for example the price in dollars of a typical TV over time. I don't want to know the price in dollars/pixel of a typical TV over time. A graph comparing dollars/pixel of TVs to the price of college doesn't make sense to me.
  - blagie 5y ago
    The increasing standards are a part inflation, at least as perceived by consumers. Younger generations keep citing cheap housing of older generations. One of the differences is that in 1800, I could chop down some wood, and put up a home, with no electricity, plumbing, or much of anything else. Basic shelter was available to anyone willing to do the work of building a log cabin, and who can afford an axe. In 2021, the baseline cost includes everything from inspections and licensing, to fancy manufactured insulation, to sophisticated plumbing, to meeting fire codes. It's worth reading about the legal troubles of people trying to live off-grid. Same thing with cars. If I could, I'd buy a 2021-equivalent to a VW Bug, but I can't. There's a mandatory minimum standard of living. This has all sorts of cascading impacts, not the least of which are the power dynamics of wage slaves lacking a BATNA.

nimos 5y ago

Yup. Welcome to the wild wild west of hedonic adjustment. Things like side impact airbags and rear view cameras basically give the BLS unlimited power to drive down inflation.

standeven 5y ago
I don't believe new or used vehicle purchases qualify for hedonic adjustments. https://www.bls.gov/cpi/quality-adjustment/home.htm https://www.bls.gov/cpi/quality-adjustment/home.htm
- nimos 5y ago
  Cars fall under cost based adjustments. This is the most recent (AFAIK) document the BLS has published: https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf It's not entirely an unfair point in the sense clearly a modern car with modern safety and electronics costs more to produce (hence the cost basis). But as far as I know the BLS is basically given free reign to invent the cost basis.

runeks 5y ago

Bear in mind that the chart covers a 20-year period. A 56% rise in prices over 20 years is 2.25% per year. Why doesn't it make sense to you that this particular basket of goods can rise in price, on average, 2.25% pear year while individual goods in the basket can either fall in price or rise much faster?

Thorrez 5y ago
The reason I find that confusing is that cars keep getting new safety standards, emissions standards, fuel economy standards. Adding those new features isn't free. But somehow cars managed to decrease in price in inflation-adjusted dollars. Have there been significant technological advances that would allow car prices to decrease in inflation-adjusted dollars? Additionally, from my own point of view, it doesn't feel to me car prices dropped in inflation-adjusted dollars. This could be a mistaken feeling though. This graph seems to say cars increased in dollars pretty steadily from 2014 to 2021: https://wolfstreet.com/2021/05/27/the-whole-mindset-has-changed-consumers-are-willing-to-pay-a-lot-more-for-cars-and-trucks-generating-record-sales-gross-profits/ https://wolfstreet.com/2021/05/27/the-whole-mindset-has-chan... Maybe that's just people switching from sedans to SUVs though. That could also be responsible for my feeling of the inflation-adjusted price not changing, if I was looking at sedans in the past but SUVs now.
- garmaine 5y ago
  They haven’t decreased in price. The feds instead say, essentially, “hybrid cars and airbags didn’t exist when this metric was invented, so to compare apples to apples we’ll guess at what a 1960’s car would cost if it were made today today” and then invents a number.
  - rsj_hn 5y ago
    A better description of what they do is to make a list of the features that car Modern has and car Old doesn't. Say the airbag. Or anti-lock breaks. Then they look at how much it costs car Modern to add the airbag, using manufacturer's cost of producing that feature. Or how much it costs to have anti-lock breaks. Then they subtract that from the price of car Modern to try to get an apple to apple baseline of how much it would take to produce car Modern without the feature. Note that this process is not a hedonic adjustment, it's a production cost adjustment, which is what is used to deflate the price of cars.
    - garmaine 5y ago
      It’s not how costs and prices work though.
  - Thorrez 5y ago
    Then nimos's second link is pretty useless to me. I want to know for example the price in dollars of a typical TV over time. I don't want to know the price in dollars/pixel of a typical TV over time. A graph comparing dollars/pixel of TVs to the price of college doesn't make sense to me.
- blagie 5y ago
  The increasing standards are a part inflation, at least as perceived by consumers. Younger generations keep citing cheap housing of older generations. One of the differences is that in 1800, I could chop down some wood, and put up a home, with no electricity, plumbing, or much of anything else. Basic shelter was available to anyone willing to do the work of building a log cabin, and who can afford an axe. In 2021, the baseline cost includes everything from inspections and licensing, to fancy manufactured insulation, to sophisticated plumbing, to meeting fire codes. It's worth reading about the legal troubles of people trying to live off-grid. Same thing with cars. If I could, I'd buy a 2021-equivalent to a VW Bug, but I can't. There's a mandatory minimum standard of living. This has all sorts of cascading impacts, not the least of which are the power dynamics of wage slaves lacking a BATNA.