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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 particula

by 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.
  - Thorrez 5y ago
    This basically supports my confusion. nimos's second link says that cars stayed the exact same price in numerical dollars, meaning cars should the same price they did today as they did in the past. You seem to be saying cars have gone up in price. There's a contradiction.
    - blagie 5y ago
      It's not a contradiction. A 1980 Dodge Aspen cost under $5000, and was a large sedan capable of carrying 6 passengers. From a consumer's point of view, a comparable car today -- something suitable for transporting a family with three kids -- is around $20,000, so about 3% annual inflation. http://blog.consumerguide.com/wp-content/uploads/sites/2/2017/10/Dodge-741x1024.png http://blog.consumerguide.com/wp-content/uploads/sites/2/201... On the other hand, a 2021 Kia Soul or Chevy Trailblazer have features which wouldn't exist on a 1980 vehicle, or only be available on super-luxury models, so if they sold in 1980, they'd probably be $20k. Zero inflation. They have: * Crumple zones * Air bags * AC * Much better gas mileage * Power windows * Touch screens * Various driver-assist systems * Cell phone connectivity / bluetooth * ... and so on It depends on how you squint; data can paint either conclusion. On a related note, if you wanted a 2021 car with the same amount of steel as a Dodge Aspen, you'd be looking at a lot more than $20k; cars back then were built in ways which required a lot more material (an upside being maintainability; you could pop the hood and do a lot of work yourself).
- nradov 5y ago
  The cheapest new car in the US today is a Mitsubishi Mirage for about $14K. Back in 1985 the cheapest new car was a Yugo for $4K. In inflation adjusted terms that $4K in 1985 would be equivalent to about $10K today, leaving a remaining difference of about $4K for the new Mirage. So is a Mirage $4K better than a Yugo in terms of safety, comfort, and reliability? I would say yes but that's a matter of opinion.
  - Thorrez 5y ago
    Your comment illustrates exactly why I'm confused. You say cars went up in numerical dollars from $4k to $14k. But nimos's second link says that cars stayed the exact same price in numerical dollars, meaning cars should cost $4k today. There's a contradiction.

by runeks 5y ago

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.
- Thorrez 5y ago
  This basically supports my confusion. nimos's second link says that cars stayed the exact same price in numerical dollars, meaning cars should the same price they did today as they did in the past. You seem to be saying cars have gone up in price. There's a contradiction.
  - blagie 5y ago
    It's not a contradiction. A 1980 Dodge Aspen cost under $5000, and was a large sedan capable of carrying 6 passengers. From a consumer's point of view, a comparable car today -- something suitable for transporting a family with three kids -- is around $20,000, so about 3% annual inflation. http://blog.consumerguide.com/wp-content/uploads/sites/2/2017/10/Dodge-741x1024.png http://blog.consumerguide.com/wp-content/uploads/sites/2/201... On the other hand, a 2021 Kia Soul or Chevy Trailblazer have features which wouldn't exist on a 1980 vehicle, or only be available on super-luxury models, so if they sold in 1980, they'd probably be $20k. Zero inflation. They have: * Crumple zones * Air bags * AC * Much better gas mileage * Power windows * Touch screens * Various driver-assist systems * Cell phone connectivity / bluetooth * ... and so on It depends on how you squint; data can paint either conclusion. On a related note, if you wanted a 2021 car with the same amount of steel as a Dodge Aspen, you'd be looking at a lot more than $20k; cars back then were built in ways which required a lot more material (an upside being maintainability; you could pop the hood and do a lot of work yourself).
nradov 5y ago
The cheapest new car in the US today is a Mitsubishi Mirage for about $14K. Back in 1985 the cheapest new car was a Yugo for $4K. In inflation adjusted terms that $4K in 1985 would be equivalent to about $10K today, leaving a remaining difference of about $4K for the new Mirage. So is a Mirage $4K better than a Yugo in terms of safety, comfort, and reliability? I would say yes but that's a matter of opinion.
- Thorrez 5y ago
  Your comment illustrates exactly why I'm confused. You say cars went up in numerical dollars from $4k to $14k. But nimos's second link says that cars stayed the exact same price in numerical dollars, meaning cars should cost $4k today. There's a contradiction.