One of the criticisms I’ve had about the way BLS calculates price inflation is the Hedonic adjustments applied by the Bureau. We’ll spend some time in the near future discussing and debating the weaknesses of hedonics.
For those who may be unaware, Hedonics is the technique used (in theory) to separate the difference between inflation and "product improvement."
For tonight’s open thread, I want to ask a slightly different question.
What aspects of the modern economy have resulted in product degradation, i.e., increased time consumption for services; on hold for tech support, weaker quality goods, or any other negative factors that are not otherwise incorporated into price?
Call these the "Anti-Hedonics." They are the effects of living in an "Always Low Prices" world that results in a poorer product or service for the same amount of money.
Question: What does the flipside of hedonics -– dedonics? — look like?
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What say ye?
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Food quality. Someone on this very blog described him/herself as a chemist who worked for a food company and said that his/her job was essentially to find ways to replace the more expensive food ingredients with cheaper fillers that tended to contain less nutritional value.
The trend has been with us for a long time. But, it’s gone far enough that the very concept of “wholesome food” has become a “luxury” — it’s own niche(!) in the eyes of market regulators. (I.e., the FTC wanted to categorize WFMI and Wild Oats within their own separate “premium” market.)
Clothing: lower prices were achieved by substituting lower quality components (thinner fabric) and shoddier construction (single seam instead of double at stress points). So my clothes now cost less, but don’t last as long. A “cheap t-shirt” now costs 9$ instead of 15$, but only lasts half as long. So I need to buy twice as many …
I guess that’s OK if you’re a trendoid who would be constantly be replacing their wardrobe anyway, but for the rest of us, it’s a loss disguised as lower prices.
Should be “its”, not “it’s”…
cheap voice communication services (cell phone/long distance etc)
yes, the marginal cost of the extra minute of voice calling is basically zero.
however, just as cheap high fructose corn syrup encourages overconsumption/obesity, marginally free communications discourages prudent use of the phone.
eavesdrop on most any public cell phone call and you’ll come to the conclusion that the person’s call wasn’t really THAT important.
That’s interesting, I didn’t know there was a term for it. As an efficiency consultant there are many little things that drive me nuts and are sucking up our productivity:
Poor service – this has many faces but think of all the time you spend while a kid at McDonalds makes 5 attempts to give you extra mayo before finally giving up and calling the manager.
Just in time inventory – very sad when it’s not in time for you. Also in this category is the “slow boat from china” problem that importers are well aware of.
Unscheduled repairs – Highways, air conditioner systems, heating systems, bridges – when did it become so uncool to do routine maintenance BEFORE things actually start to fall apart.
Of course the usual suspects of spam and telemarketing and the entire legal profession (I believe Douglas Adams’ solution was to put them all on a rocket ship to another planet).
Plenty of things sucking up productivity, including the Web unfortnately. You are much more patient than I am finding new things to read – I mainly stick to my bookmarks these days as the trash factor has multiplied a lot faster than the good content seems to have…
Waiting in line at Costco which is even more crowded than ever. Waiting in line there when you only have a few items (but they are very big items). Not being able to buy bread there due to the fact that they only sell family size things. So they tell you to freeze it except why buy fresh bread and then freeze it? We buy pre preped salad occasionly and never ever finish the huge package in time. Never mind that it did cost less than a smaller package at a more “normal” store. It is just a % waste.
The whole phenomenon of hedonic pricing on cars.
Yes, cars have a million more features now. A million more things to break. I don’t want a CD player, dual climate control, etc etc. How about a simple car that costs less that actually works. Heck, I don’t even want cruise control, considering I rarely drive more than 15 miles in one direction, and it’s all through relatively congested freeways.
Also, cars might be “cheaper” after hedonic adjustments, but of course, the inevitable repairs cost more, since everything is a fricking computer.
City “planing”, or the lack thereof. It is a slow, insidious drip on the urban economy.
Example: when I lived in Boston I quickly determined that I had to pay for housing with a combination of three currencies: cash, time in travel, and increase in personal security. At best I could maximize 2 of the 3 variables, but either I paid more or it took longer to commute or the neighborhood was dicey. No way to find a nearby place that was inexpensive and safe, the city just isn’t built that way. It’s an economic structural flaw.
Knowing that the post-1950’s US city is based on cheap vehicle fuel and house heating/cooling, urb/suburb/exurb I think that dislocations are to be expected. I see no components of inflation that take these into account.
Joe Battapaglia is kicking some Don Luskin ass on Kudlow & Company tonight.
Hellava job, Joe! And we all appreciate your “Mark to Truth” mantra coined tonight very much!
That is what we are all about here on this site.
“Mark-to-Truth”
Damn straight!
Airline tickets.
software used to come with a manual. now it doesn’t. there are online alternatives, but a real manual would be worth something
i’m noticing more and more cars require premium gas.
airline tickets. smaller seats with less legroom. no free food/drink. extra charges for checked bags.
Self service checkouts at the grocery store or Walmart — especially if you get stuck in line behind someone who has no idea what they are doing.
A google on disruptive technology also generates some interesting ideas:
http://en.wikipedia.org/wiki/Disruptive_technology
Water quality. Whether justified or not, many people don’t trust their tap. So, they buy bottled water.
I don’t know whether water quality has really gotten worse or whether it’s just perception. But, the perception change has been strong enough to change behavior, to prod people to buy lots of bottled water. Those bottled water sales should be excluded from GDP.
HFCS instead of sugar in soda pop; heck, HFCS in everything
Mandated ethanol in gasoline
Windows XP, Windows Vista
More planned obsolescence in virtually every product available. Want a mop? Go ahead — buy it cheap. When you need a new mophead, that old one will no longer be in production. Want new garden gloves? Sure — these will last you three weeks.
Also, the sneaky changing of the price/content ratio: Like a box of fig newtons? Only 4 bucks, and you get a whopping 14 oz! (used to be a lot more ounces of cookies and cereal out there).
Etc. etc.
Anything involving airline travel.
How ’bout the folks in rural communities who live downwind from farms fertilized literally with (processed) NYC shit? They say the smell is “the worst”.
Was a great article in Harper’s on it.
It keeps costs down for NYC sanitation and for the farms. But, it makes some people miserable, in a way that AFAIK doesn’t show up in any econometrics.
Right now, I’ve been on hold 20 minutes and counting to yell at Cablevision for not crediting returned equipment.
What about those cordless phones Panasonic makes? In 2-3 years, a few buttons will wear out on the phone and you need a new one. I screw them by opening up the phones and crazy gluing tinfoil to the backs and they work again.
More planned obsolescence in virtually every product available. Want a mop? Go ahead — buy it cheap. When you need a new mophead, that old one will no longer be in production. Want new garden gloves? Sure — these will last you three weeks.
You might be interested in Cradle To Cradle.
“Free” Checking accounts. Spent part of a work day morning (about 20 minutes) on phone trying to correct a problem (payee claiming payment not received, bill payer online showing as paid) and getting nowhere — literally stuck in a computer voice black hole. Ended up going in person to the branch office where account was opened, waiting, and finally getting a branch manager to help me get to bottom. If branch office was not nearby, would’ve been an even bigger frustration. As for the “Free” – they charge you for the online bill pay service!
Being a sports fan… If my squad wasn’t in a big market I wouldn’t be able to stand it. Between the lack of parity, $60 tickets, $20 beers, and $15 hot dogs it’s getting brutal.
It deserves repeating:
Windows Vista – also just about anything from Microsoft these days – Office 2007 tab bars that require twice as many key strokes, Hotmail pop-ups that cannot be deleted, minimized or moved out of the way. My next PC will be an Apple.
Perhaps the opposite of hedonics is shedonics (or, w/ less grammatical parallelism, herdonics).
1) Education.
2) Shares of Citigroup.
3) The Educational value of buying shares of Citigroup.
Cable television. I don’t need or want a gazillion channels of crap. How about if I just pay by time my TV is actually on? How about bunde all my actual time used– phone, tv, internet– and offer a really great price?
What aspects of the modern economy have resulted in product degredation??
Freeways… and morning and afternoon traffic crawls….
Self serve gas…no oil checks windows washed…air pressure checks..etc.
Lowest wages in stores…try asking a kid in Footlocker if they have running shoes with a European last in them….uhh huhhh…
Talk radio…has anyone else noticed that ESPN is now 40% commercials?
Modern movies…Uh, noticed any Lawrence of Arabias? Gone With the Winds? But I bet you have seen Rocky 12…..
and so on…
Bruce in Tennessee
Airport security
All of the cheap electronic devices that are obsolete in a year or two. Remember when a TV lasted fifteen or twenty years? Who needs a %$#^ 12 megapixel camera anyway?
1.6 gpf toilets.
I’ve always thought Hedonics in the CPI was an utterly ludicrous concept. My TV remote now has 700 functions rather than 70 so the cost of TV’s have down by 10% of whatever the numbers are. Compare the IPOD with the musical box, another massive cost reductions. It’s totally inane.
Irradiated food sold as fresh food.
That apple (whatever) looks good but you have no idea which year it was harvested. It is cheaper and is available year around but lost the flavor and it is not alive anymore. If it is fresh it should rot in a few days.
My candidates for dedonics:
1) Vista
2) Ever shrinking keyboards
Recorded music and its associated appliances.
Word: Decontent
Reference: Auto & trucks
Secondary reference: Zero % finance by auto
mfg’s.
As always, your mileage may vary…..
New home construction. Or old home repairs.
The worst stories involve stucco exteriors that are sealed improperly against the rain so rainwater collects inside the wall and rots the wood. A friend had a new house built and they left off the flashing around the windows. Three years and two lawsuits later it cost $300K to rip off the entire facade, replace the rotted wood, install the f-ing flashing, replace the stucco. All because they were too lazy or too stupid to install $200 worth of flashing. And every construction worker there knew it was missing.
Having spent several hours on the phone with my lovely Customer Care representative from Verizon today, I am about dead dedonically. Consumed, drained, used up, exhausted. Plus my intermittent telephone service will continue as intermittently as it was before. Fortunately I’ve lived in the 3rd world so I know for intermittent telephone service. Thank you Verizon for caring…and the cheap prices that I pay for my intermittent dial tone.
This thread is turning into a “whine-fest”. We need more discipline to get quality answers.
– Some individuals will always buy the cheapest alternative because they BELIEVE in the intrinsic value of spending the least amount of money, all other considerations be damned. These individuals have influence, because they brag about how much they save and as such influence other individuals to be dissatisfied if they find out they spent more.
– Some individuals will choose to spend less on item X to have more money to spend on item Y. They do not consider loss of quality in item X an important consideration.
– Some sellers are corporate bodies so large that they literally make more money by consolidating and simplifying their product path (to include using cheaper input materials, lower quality labor, etc) than they would if they sold (for example) 5% more copies of item X.
These three factors (there are others, are they more significant than these?) drive the price that can be charged for item X down. If that price goes too low, producers will decline to run item X production lines, why should they do something that costs THEM money. The last production line standing for item X is unlikely to be the one that was producing the highest quality version during the competitive phase, because individuals are scrambling for the lowest cost version.
I think there is a barrier to selling items on quality alone, intrinsic to the quantity of items available in a consumer society. Because everyone must buy many things, only a tiny number will pay for quality in any one type of item. Therefore a lot of money can only be made by flooding the lowest common denominator niche. The finest of any one thing will only attract a handful of “aficionados”, which in turn will drive the price very high.
I think this line of reasoning identifies the source of dedonic activity. The advantage of scale, in production, distribution, and financing, drives all items in the market toward the lowest common denominator. Since the advantage of scale cannot be compensated for economically, it can only be ameliorated through regulatory force. Therefore, for example, if HFCS is unacceptable, it must be made illegal, and the additional cost must be shouldered by the community as a whole, if higher quality food is something people are willing to pay for.
Absolutely brilliant point! Most critics argue that the CPI hedonic adjustment is impossible or part of some conspiracy, but this approach is better: concede that maybe it makes sense, but only if the accounting is fair. There is hedonic red ink as well as black. The word “dedonic” won’t do, however. He’done’ is Greek for pleasure; the word for pain is alge’sia. Hedonics and algesics???
Stuck pixels in those hedonic adjusted monitors are not considered a fault by many sellers especially online.
Paying higher banking fees but not being able to call my (former) banker at the local Bank of America branch.
Paying more per song for lower quality recordings in the form of MP3s rather than CDs. OK, I only buy CDs but ….
$30 printers with $25 ink cartridges that dry out in a month and 1.5 quart “half gallons” of ice cream to name a few.
But really, I can’t say I pine for the good ol’ days of putting the DOS disk in the computer to boot it and rewinding VCR tapes. Whereas that VCR ran forever, there came a point where you had to smack it to get the sound to come out right. You knew it was on the way out and bought a DVD player. Now in the digital age we have these things that just stop working mysteriously one day, so we think it’s cheap crap because we conveniently forget the year that we dealt with that VCR that was still working, but not quite right! All of this because a vital 3 cent component fried inside, whereas that 3 cent component wasn’t as vital before in the analog age. Seems to me, though, that these great substitutions are way overrated! I mean, how much more entertainment do you get out of a movie on DVD than you did one on VHS? Honestly, none at all. Yet I bet the increased quality of that DVD is considered an improvement, even though both provide 90 minutes of entertainment.
And how wonderful does that Crackberry make your life? Sure it’s a wonderful gadget that makes you twice as productive at work, but it eats your leisure time and for some reason you’re not getting paid twice as much (relatively speaking). Seems to me that this technological advance is anti-hedonic! So is a cell phone a wonderful portable alternative to that land-line, or just an electronic leash? Seems to me like a wash.
I say if you want the job done right, Just Do It(to take a phrase form NIKE) yourself. That’s why I planted my own garden, pick my own veggies, buy what I don’t grow from my local Farmer’s Market and only consume meat’s grown in my home state when possible. Some of my fish comes from other states than Oklahoma. I’m happy, fat and livin’ the good life. I think this is a hedonic adjustment for me. Better quality food at a very low cost.
self serve coffee or coffee served to you but you have to add your own sugar and milk. You have to wait in line usually because the table is always crowded. And those little darn packets that you have to shake back and forth before tearing them open. That 2 minutes adds up and they should be paying me for this. At my wage that’s about one dollar of time. For them it’s ten cents.
Self serve gas is another one that really gets me.
Laptop AC adapters – All 3 laptops I’ve had over 5 years had problems at the DC jack end – just 5 days ago, power recharging become intermittent on my 5 month old Lenovo – only by pressing over the wire would power flow – until eventually it just emitted smoke and the wire totally separated..
Of course its all one unit nowadays isn’t it so you can’t just expose the bare wires and suitable and correctly solder or otherwise connect them to a new DC jack/connector.. you buy the whole AC adapter all over again.
Sure, its under warranty but still –
And this is the 3rd laptop that has caused this problem.
-K
Personally, I really don’t see much that isn’t better today. It is easy to crab about stuff… but housing is better, cars are better, stuff is far cheaper, communication is fabulously easy, the internet is heaven on earth: you can look up anything in existance, buy from anywhere, get it the next day. Computers are dirt cheap for virtually unlimited power, software is free (I use Linux). People just love to whine, however, so they don’t admit positive things.
There’s a whole insidious branch of product engineering that’s called “Cost Reduction”. This is where good components are replaced with more cost effective (cheap) components and is the source of all this evil.
I’m waiting for “Quality Enhancement” engineering to take root, but I’m not holding my breath.
Folks,
Barry said “For tonight’s open thread, I want to ask a slightly different question.”
So, while there are two related problems:
(a) hedonics employed by the BLS that we, the TBP readers, believe are applied too generously (computer, car)
(b) dedonics, outright product/service degradation.
in the current thread, I believe Barry’s asking us to supply him with examples of category (b).
Now, although I say that, it’s not immediately obvious to me how to distinguish, since we don’t each know whether or the extent to which the BLS uses hedonics for the particular products/services we each mention. So, as I read some of the responses and say to myself “oh, that’s not what Barry’s looking for”, really, I don’t really know for sure.
Maybe it would help if after providing an example we also try to classify it, for Barry and other readers to parse more easily.
The question posed by BR (hedonics versus dedonics) underscores the politicization of the model upon which inflation is calculated.
The magic of hedonics provides many benefits to the politicians, including smaller COLA’s (cost of living adjustments) paid to social security recipients and to retired Federal employees.
There are a few 99C stores in my neighborhood and everything that they sell is made in China and of inferior quality. A lot of it is just simply junk. You could actually buy a hammer or a screwdriver in one of these stores and then be able to bend it in half. How is this product degradation adjusted for in the CPI?
Almost every retail transaction has an element of corporate up-sell now that is impossible to avoid. Even something as subtle as a grocery cashier asking, “did you find everything you needed”? isn’t a sincere question. They’re making 8 bucks an hour, they could care less, but it’s their job to ask- they have to.
Up-sell is everywhere, and it becomes tiresome to fight off. It’s dehumanizing knowing that it’s their job to get every dollar they can from you. Often i get the urge to just say, “can you just stop reading off your monitor and talk to me, please?”
– Myriad decays in quality of life most any place with rapid growth. I live out West and it is very visible. Whenever I am in California, I think what a paradise it must have been when there was only half the population there is now. If that were the case, I would move there in a heartbeat. So would lots of other people. Which is why the population doubled…..
– Decay in the quality of the mainstream media.
On the other hand, I get so much from the Internet that could never be quantified. But given a choice between a life with and a life without, I would need substantially more money to chose a life without the Internet.
Although that is no excuse for the government to short sheet people on social security
I have certainly noticed a marked deterioration in the quality of clothing from the larger retailers and brands. I remember buying items 10-15 years ago from GAP, Banana Republic, Hilfiger etc made in a number a different places (Bangladesh, Jamaica, Pakistan…) that would actually hold up for quite a while. Now you buy a “Made in China” shirt and after 3-4 washes the color is bleached-out, the shape is f*cked and buttons are falling off. Meanwhile prices have not gone down one bit (B.R. is the biggest rip-off out there in the segment).
Didn’t some recent nobelists in Economics look at how one can examine independently the impact of human decision making behavior – to buy or not to buy – on product pricing?
Few of us have mentioned the implications of the profit motive as a factor in turning a silk purse into a sow’s ear. Yes. I’ve reversed the metaphor.
Pre WWII the Japanese were famous for this as the Chinese are becoming now.
I think, however, that how to describe dedonics relates more to what James Nutley wrote about. Said differently, how much degradation will the market bear before it stops buying a particular widget. Sort of the reverse of how much can you charge before you price yourself out of the market.
I don’t think either of these concepts are uniquely related, however, to a “modern economy.” Might they not also have something to do with a gradual but fundamental change in morality. For example, interest rates that used to be considered usurious are now commonplace.
Moreover, this doesn’t mean that manufacturers haven’t become more elegant in their strategies calculated to fool us into thinking that the quality we’re buying today is no different than the quality we bought yesterday. In the last analysis though it still gets down to the color of the box, product placement on the shelf, repeated, comforting slogans hypnotically repeated by mesmerizing pitchmen, and assurances of social approval or medical health that will continue to delude us into not only buying what we don’t need, but what doesn’t meet our expectations.
“(B.R. is the biggest rip-off out there in the segment).”
Obviously referring to Banana Republic. Not the gracious host of this blog.
;-)
Dedonic: The loss of our capacity to do anything as a nation that requires organization over a larger scale we can handle through corporations.
For example, we could not build the Interstate system now or an Apollo project and can organize our health care system in a way that is rational from any perspective, right, left, or center.
(To balance this, of those things that can be done by corporations, we as a society are capable of far more than 30 years ago.)
One of my favorite subjects, near and dear to my heart. But I have to go as I don’t want to bill you for my time. And, yes, my time is also important though you couldn’t prove it based on service support in today’s U.S. and globalized half-stepping economy.
Appreciate this one.
Fascinating question, Barry. Thank you. And excellent responses. Another reason why I love this blog.
Oh. The quality and variety and diversity of beer in the United States has vastly improved since the 1970s. Schlitz anyone ?
Consider the hedonics of home and life insurance, confabulated by their margins set lower than financial institutions with less over-sight and far less available insurance-on-insurance, as Buffett’s latest $24M arm-twist in the Gulf will attest.
So there is no room or reason for product improvement, and yet the same downside exposure to Level III asset devalutions anchoring insurance payouts, if you will.
Not only are you now paying 25-35% more than you should be for your home and life, since the insurers only pay out up to the **replacement value**, and that value is crashing, but the odds that you’ll be one of the lucky redeemers, instead of one of the fine-printers, or that’s not covereds, or we rewrote your policy, and you had to live for just one day longer to be covered, are, well, wow…. Tough luck!
Just ask around. Payouts aren’t monitored, nobody’s running BigInsurance.Typepad.com, no DJInsuranceAnnual index, replete with hedonic cheerleaders telling you how great XYZ Home and Life is. Instead, your agent will probably try to talk you into parking some of your funds in an insurance annuity that.. oh, sorry, yeah, they went bankrupt last year, yeah, .. but you can still get in on a class-action lawsuit though!
Like John McCain says, “Ya’ just gotta believe!” [que Fantasia, in 3… 2… ]
Faith-based mumbo-jumbo health-and-home dee- dee- dee- dedonics, in a nose dive!
Good job, men!!
God, what a bunch of complainers.
My Vista system works great. But buy it originally installed, do not upgrade. And this just in — Blue Screens of Death occur on Apples, too. I own two and I know.
Waiting in line at Costo…awwwwwwwww. My heart bleeds.
Cars. I have bought Hondas for the last 15 years. They tend to rust a bit quickly, but boy, do they run forever. Change the oil, tune ups, replace the brakes/tires and do the other scheduled maintenance and they will purr for 200K miles.
Food. You have more access to more fresh vegetables today than ever before. Some of you may too young, or too blind, to remember, but fresh tomatoes used to be SEASONAL. Now you can get them anytime. Not to mention 10 kinds of lettuce, squash, mushrooms, zuchinni, you name it.
And this just in, moaners. You don’t have to buy stuff with high fructose corn syrup. No one’s holding a gun to your head.
Clothes. When I was in the corporate world, I used to buy my suits at Filene’s basements. Hickey Freemans for under $500. THAT’s a bargain. Still have em, 10 years later. Now, all you need to do is got the outlet shops and the high quality bargains are there to be had. At Nordstrom’s outlet I got a cashmere sport coat last winter for $125. Good jeans — Lees — are $20 bucks at Kohls. They’ll last for years.
Again, it is amazing to me how unhappy so many who post on here are. So sad.
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BR: You are astonishingly clueless.
This discussion is not about complaining — its about how inflation is understated via hedonics, and how misleading that process is.
You may be the first person I have to ban from posting comments due to a lack of basic reading comprehension skills . . .
Fruit Juice: Now it is little more than sugar water (go look at the cranberry juice shelf). Anything 100% juice is super expensive. Same for the frozen concentrates. Also note the flavored juice trick (Use apple juice and doctor it up with other stuff to sell it as a “cocktail”)
All software: (both Microsoft and Apple) It’s bigger, it’s bloated, and it always ships way before the bugs have been fixed. Also, Software Updates: Can I please start up my computer without prompts from MSFT, Apple, Adobe, Anti-Virus telling me a new version is available.
Clothing: Look at the fabric weights of the old yet sturdy shirts hiding in the back of your closet. When you buy new stuff you are literally paying for new “threads”.
Plastic S&*!%: I have purchased many items over the last year where they failed in the basic mode of operation during the first use. (right out of the box, non-electric stuff). Crazy.
Milk: I don’t want to get into the whole bovine growth hormone debate, but if you have contrasted organic milk vs. the other stuff you know what I mean.
Farmed Fish: Not sushi grade. Not safe.
Stereo Equipment: Go buy a new non-audiophile receiver. Not only does it sound like crap (low quality A/D converters), it weights nothing and feels like the box is full of Styrofoam. Garage sale stuff is better.
Computer Keyboards: Could they suck a little more? Given how much time we spend on them, could the be a little more chincy?
Computer Monitors: Instead of 8-bit LCDs, manufactures like Apple, are choosing to give the illusion of millions of colors using 6-bit LCD’s and dithering. Lame.
JIT Inventories effect on the SHELF LIFE of food you buy at the grocery store. It “times out” in just a few days.
Postal Service for new construction: It used to be “front door” service. Now there are grouped mail boxes a block away which large number of households share.
Road Construction: Patchwork and never ending paving have everything in a state of decay and traffic madness. How about some monster machines that can strip and pave a road in one pass, with digitally awesome accuracy … and do so at a lower cost, during the middle of the night when commuters are not out.
Camp Sites and National Parks: We have already paid via taxes, but there are parking fees, seasonal permits, hiking permits, site fees, extra car fees.
On the bright side, I’m seeing higher quality wines available for cheap :-) Also, the women keep getting more and more beautiful every year.
Many of the products we buy at low cost from China are of world class quality. We get electronics for lower prices because of the lower labor cost.
Problem is.. we make them more affluent. They buy cars. They compete for gas. We pay higher prices for gas. Ultimately, we fight wars over resources to keep them from going to the countries we have empowered.
So, was that cheaper tv, tshirt, toy really a good deal? Well Larry Kudlow says it is so it must be, but thinking people still wonder.
For the apologists of the current state of affairs I quote the original question: “What aspects of the modern economy have resulted in product degradation”
If you have not experienced this effect or just conform to it, that is ok. Others have observed degradation and should voice their concerns without being labeled.
It is not that we are all unhappy. The question begs a negative replay despite all the blessings we may have.
Regarding fresh vegetables – in general they aren’t close to the quality of those in my father-in-laws garden. There is just no comparison between a store bought tomato and one picked ripe off the vine. Avocados can now be bought in Buffalo. But they bruise so easily they must be picked while barely ripe. Eat on right off the tree and the grocery store variety is a pale imitation. We have traded seasonal for year ’round at the expense of quality. Have you ever eaten a strawberry still warm from the sun shining on it? Or swiss chard cut from the garden and thrown into the pot?
These differences are exactly what this topic is about. The quality HAS degraded on many things. Quality costs money. Not too many people are willing to pay that cost. So we are stuck with, or have chosen, cheaper goods of lower quality. We shouldn’t complain. If you want top quality, pay for it.
Virtually all clothing items seem to last less long than before. Jeans rarely seem to last more than six months, they wear through at the seat. Including the $20 ones that the guy above noted. Maybe they last years if you only wear them once a week. I have three pairs that I rotate through, wearing them 5-7 days a week and they don’t last.
Running shoes. I used to wear out the liners eventually. I’m hard on shoes and got used to the fact that in 6-8 months of heavy use they’d be gone. These days I’m wearing through the soles in just a few months, I never even get to the point where the liners wear down.
I do wonder where the guy above is finding fresh tomatoes anywhere outside of farmer’s markets and small local farms. My definition of fresh, of course, being the same one we used when I was young: “picked off the vine ripe and ready to eat.” NOT picked green several weeks ago, “ripened” by gassing them in a warehouse and served up pale orange rather than bright red.
I point out that last one because one of the key sources of dedonics is crafty changes in terminology that have been allowed by the various regulators or promoted by businesses. “Fresh” used to mean something that was very recently picked, fished or slaughtered in pretty much “ready to eat” state. Today it means nothing more than “never frozen.” The fresh tomatoes that my grandmother brought home have little to nothing in common with the “fresh tomatoes” available at my local supermarket, even when they are in season!
-btc
Public education, K-12.
Car bumpers. They used to be big, chrome plated and could take a low speed collision. Now they are styrofoam filled fiberglass that makes touching bumpers a $1000 repair.
sifting through 300,000 SKUs in itself is dedonic: we’re over-consumed. Someone shrink the CPI basket to a size where you can drown it in a bathtub.
When I see BLS, I think Bureau of Labored Statistics.
“What aspects of the modern economy have resulted in product degradation?”
The Federal Reserve, and, its Duopolistic partner, Big Government–ripped from its Constitutional moorings..
and, with this: “Since the advantage of scale cannot be compensated for economically, it can only be ameliorated through regulatory force. Therefore, for example, if HFCS is unacceptable, it must be made illegal, and the additional cost must be shouldered by the community as a whole, if higher quality food is something people are willing to pay for.
Posted by: James Nutley | Jul 7, 2008 9:05:28 PM
Mr. Nutley,
You must, quite seriously, rethink your position.
The quality and workmanship of bensteinery has certainly declined from its days as a “one hit wonder” in the 1970s.
Back in Tricky Dick’s time, Ben actually believed in Evolution !!!
Jobs: I realize that this is a bit subjective, but IMHO transferring production from a fairly paid, healthy labor force to slave labor, creates a economic negative that stifles economic growth.
My pet peeves in this area:
1. Too much competition, too many similar products.
It takes forever to buy products/services these days if you want to do due diligence. It took me 6 months of searching and comparing to finally decide on a new digital camera (Canon A650 IS). I brought it in March. Now it looks like Canon has discontinued the model!
Or telephone plans. You have to construct spreadsheets to plot out all the options and costs. Then you have to plow through reviews.
There is such thing as TOO MUCH competition which forces each manufacturer/service provider to do their best to obfuscate what they are offering in order to try to look better than the next guy. Which in the end, is a great waste of time.
2. Google search.
It is very difficult to get useful results from Google (actually most search engines), particularly when looking for reviews. Page one & two results are too often littered with garbage links from companies like Nextag, Dealtime, Pricegrabber, etc. which promise reviews but often have next to zero reviews when you click through.
I have read every post and almost every comment for the last two months and I know you say you are an advocate for “free” market capitalism” but that that is the root of all above complaints. Of course I could be wrong but from the community college dropout perspective this is how “greed” market capitalism” works:
1) Person gets a bright idea and starts a company.
2) Person can’t afford to expand company so they sell most of it to the public.
3) Person gives self a big raise and buys a private jet.
4) Shareholders get upset because they wanted bigger returns.
5) Person cuts costs of running corporation by buying cheaper health and dental for employees. Also lowers matching 401k contributions from 6% to 3% (I hope those are percent symbols they look kind of funny).
6) Shareholders rejoice and congratulate person.
7) Person buys yacht and gives various family members and old college pals high paying positions with lots of bonuses. They all begin to use the most creative accounting methods in order to pillage company.
8) Shareholders once again revolt because their earnings weren’t high enough.
9) Person closes factory and sends jobs to some third world country. Company uses cheaper ingredients, downsizes product, raises prices gets rid of older, more knowledgeable workforce that used to represent the company’s product and replaces it with bodies who either work in another country or are willing to work for minimum wage and could care less about company.
10) Person finally gets exposed. Shareholders are “shocked” Person says they knew nothing about anything and due to the money paid politicians they get to take a “Club Fed” vacation!
Of course not all companies fit this description and some are forced to react to what the competition does. It just seems that with free market capitalism what is happening was inevitable. A company can only grow so much depending on population and competition. At some point the integrity of the product/services has to be compromised in order to have growth…that is THE BIG PICTURE (according to me).
Quote: Water quality. Whether justified or not, many people don’t trust their tap. So, they buy bottled water…
>> It’s trend. Tap water is in fact typically “purer” than bottled water, because the regulation on tap water quality are VERY strict, much moreso than bottled water. Doesn’t always taste better but is almost guaranteed to have as much or less of the bad stuff as bottled water.
One thing that I think has gotten worse, attitudes towards education and professions. At my school there has been a huge shift AWAY from majors such as engineering towards softer sciences (cognitive science, economics) and the humanities. Every year sets another record for fewest applications and admits to computer science and electrical engineering. I am biased but I tend to hold humanities and other such majors in lesser regard than engineering and the hard sciences.
See http://www.msnbc.msn.com/id/25570106/ about “short-sizing”
New PC’s adware
Wading through the envelope of ads for personalized post-it notes and boat insurance for my credit card statement.
Moving internet ads on sites you’re trying to read. Moving sites you’re trying to read (WSJ… you know who you are)
Product Placements in movies (and longer and longer credits… what arrogance.)
And Adobe’s uncancellable automatic request for update and intrusive advertising in general.
Pay Phones.
Mortgage Servicers.
Partisan political books for Christmas
Celebutante’s TV segments
Great Question, and nice to have a chance to sound off. Doesn’t look as though anybody hit my two anti-favorites in the dedonics category:
1) The great Miracle of shipping tech support jobs to India. My personal favorite was when the tech support guy told me to speak up, he couldn’t hear me over all the distortion in the lines. There are a thousand other stories. The guys you can’t understand because of language problems, the ones who are working from a script and can’t possibly believe that any american customer could ever have any clue about software — so when you tell them I do not want to configure it like this, they say ‘don’t worry trust me, just press this, this this this… and we’re done’ — configured just like you didn’t want. But what’s really amazing (and gets to the issue of how bad it’ll get before we collective say no) is that the companies (one assumes) fancy themselves to be benefiting — lower costs. Hay Norton: I ain’t buyin your stinkin’ anti-virus when the customer support is so bad. Another example before point 2. Amazon: I must have tried to interact with amazon’s automated conflict resolution system 10 different times, sent emails, got angry, sent angry emails, nothing happened. There was some reason why the phone thing didn’t work the first time, but finally I got the phone thing to work (that may have been my OS acting up) actually got to speak to a really sweet native english speaking woman… problem solved in 5 minutes. Now just exactly how much sense does it make (or should I say cents) to pay all those web developers, and develop all that infrastructure, and creat irate customers by requiring them to navigate through endless help pages, and piss them off even more when the emails that are supposed to do something do nothing… when the solution that works, the solution that gets used, the solution that makes for happy customers is… a phone number on a web page that doesn’t network to some 25 rupee an hour guy in india.
Dedonics issue2: Ultra Super maxed out everything stores… where no one that works there knows anything about the products being sold. Indeed none of the ‘managers’ (usually 21 and ducking out of college) have any actual personal investment in whether the store lives or dies. Stores with 12 layers of management not a one of whom has any actual investment in the performance of the store, only investment in not getting blamed. Starts to seem like the whole economy is run for the benefit of absentee landlords. And people are surprised that the quality drops. So in general it seems to me: diversification and conglomerization (to coin a phrase) lead to low quality — the size of the people who actually give a shit if the store makes money or not drops as the size of the store goes up. Throw in management that isn’t ownership at every level including all the way to the CEO and you have … a con game in the form of a business. It’s just like sillycon valley: a bunch of imitation businesses whose real purpose is seperating ‘owners’ (investors) from their money.
The general problem of making societal level choices based on the very shortest term economic basis is truly much more significant than people think. I hear they are shipping lawyer jobs to india now. Gee that should be good for american culture, soon there won’t be any actual jobs anywhere, and hence no on invested in how things go. Instead there will be a small and unstable group of ultra wealthy who benefit from labor arbitrage across the planet. The down side is going to be that there won’t be any culture for them to participate in, and there won’t be safe streets to walk in, and there won’t be any decent products to buy because valuing your work, and working hard to make a decent product will have become an extremely low paying endeavor. And the environment will be a mess because poor people can’t afford to give a crap about the environment.
Hedonics my ass.
Microsoft: I am completely disgusted with Microsoft products and their extreme self-centered fuminess that exudes from every ms ad and product and scathes the senses. They have become a corporate letch/leech!
In contrast Google is Goodle – they are clean and also Yahoo is pretty darn good – always trying to do something for their customers. Hats off to both of you. I hate to say your advertising revenues may not be around forever but lets all enjoy the hypothesis while it lasts.
BTW, have any of you had a look around America lately? Need repairmen quick!
It may all end in tears someday. Off-track a little but this “basic America” product is less than what it once was, and that indicates quality of life is waning at least to some degree. Yes that includes getting less bang, less environment, less goodness, and pretty much a less of almost everything else for your shrinking tax dollar. I am starting to sound like my father!
Would it be too ironic to include government economic statistics in the category of things which have been significantly degraded in quality in the last 25 years? Remember when the GDP was remotely accurate, due to the % of government and personal deficit spending for consumption (how is that a domestic product?) being low? Remember when the CPI was a meaningful indicator for inflation?
Oh, I got another one: investor confidence in the US markets, and the free market system in the US. Both of those have certainly degraded substantially in quality during the same period.
There are many more, of course… those are just the most sly I can come up with. :)
Financial headline writers have to be near top of list…. too obvious.
Toilet Paper – in the last year most producers have made the standard roll .25″ narrower – I kid you not – far as I know, Charmin was first.
Was 4.50″, now 4.25-4.27. Now that’s a real dedonic if you’re not careful….
btw, I’m an animation fan and I really appreciate the work Charmin gives Joanna Quinn, but she isn’t costing .25″ of width.
What about the growing movement in packaged food towards delivering less for the same price? MSNBC just tossed up an article on this at http://www.msnbc.msn.com/id/25570106/ – seems like classic example of dedonics. I wonder how the BLS deals with this … if at all. If they don’t, it certainly would explain some of the pain the average joe is feeling but the statisticians aren’t.
I would have to say air travel tops most. Sure costs have been down, as long as your time waiting on delayed and canceled flights has no value and you don’t mind long security checks. Course that is adjusted for by the ridiculous ‘upgrade’ to ‘first class’ on some regional jet. What a joke.
The quality of flame wars has degraded since the days of the Arpanet…. or even before the Internet got so popular.
And I hate all the ads, too.
Buttons:
An HP 12c or 1982 IBM PC has great keyboard buttons and you could tell by feel when the keys click. Modern cel phones are mushy.
Leather:
Leather seats in cars. About 1995 leather started becoming ubiquitous but also became
thinner and harder.
Outsourced customer service 1-800-go-away:
Yes, I am adding to the whine fest, but the chance of getting connected to a rep who can solve a problem is rare. That many first level service employees barely understand English just amplifies the pain.
Not really priced products in a consumer basket, but of noticible quality:
Free web sites funded more by invasive advertising (flash animations on endless loop, dynamically generated want lists) adding to page load time and using screen space; I remember gopher chronicle.edu
about 17 years ago was as fast as many web sites today.
Public discourse on policy matters:
Compare Reagan era advocacy of eg cost-benefit analysis and tradeable permits
to today’s abdication of policy analysis.
It is not measured in the CPI, but government services and public goods form a large part of a consumer’s consumption bundle. If the quality of these goods was measured relative to the tax (current taxes plus the future taxes related to increased government debt) that is their cost, I suspect that we would see debasement. Particularly if the geometric increase in negative marginal utility caused by taxation were taken into account.
Similarly not included in CPI are economic externalities such as pollution and risk. I think strong arguments could be made that both of these negative externalities have increased for the average American.
As others have pointed out, complexity has increased. This takes up time that would otherwise be leisure time, which is an important good. In a related way, the rapid improvements in technology also require increased time spent learning this technology.
The post’s topic is excellent since it puts its finger on a bias in the CPI. The CPI also assumes that utility maximizing consumers will substitute away from goods that become relatively more expensive, so the measure is adjusted downwards accordingly. This can create a bias as well, especially when it is the least substitutible components of the consumer bundle which experience the greatest price increases. Although it is impossible, to construct a CPI measure that is not biased, all the “adjustments” that have been made in the CPI measure are biased in one direction. I’m glad somebody is finally bringing this to light. It doesn’t seem to make sense that America’s inflation is lower than other developed economies, despite the large fall in the dollar and our heavier consumption of commodities.
“If you want top quality, pay for it.”
You do realize that is the whole point of this exercise? When the CPI is calculated, it is effectively measuring yesterday’s prices for higher quality goods vs. todays price’s for lower quality goods.
The problem is complicated because sometimes the new good is lower quality in construction and functionality though higher quality in features. Or the other way around.
Ok, I can buy a new living room set for the adjusted price of a decent old-style couch. The new set is more likely to break, and less comfortable. It is more fireproof because of new materials. It is more susceptible to water damage because of all the particle board and cheap veneer. If I want a decent quality couch, it is completely out of the price range of a middle class worker (like 2 paychecks), while 20 years ago it was not that big a deal for a middle class worker (half a paycheck).
Hedonics is utter crap.
Cable TV. Years ago, when I first got it, there were few infomercials. Now, when I have insomnia, it is wall to wall infomercials late night-early morning. Also, theatrical movies have commercials, as do DVDs. TV series have less episodes, and are shorter. Also, commercials DURING shows (in corner of screen)… EVERYTHING is made out of plastic, and it breaks. EVEN when I have spent ore to buy better quality, it is plastic, and quite breakable…Pockets in pants. The last few pairs (name-brand, not “generic”) just carrying keys in a pocket rips holes in seams. Dumb but annoying problem of past several years…Medical care. Doctors used to know how to do things. Now, I need to go to a specialist for little things. Their nurses to take blood, now have to go somewhere else to have someone else do it. Another few hours lost.
A few points:
1) Hedonics is real and undeniable – stuff improves/changes price and anyone with some ability to choose/substitute benefits.
2) That said, the appropriateness of using hedonics in an official measure used to calculate a number of other things raises conflict of interest problems – and that can, should and must be debated. If the public doesn’t believe the statistics, that itself is a problem. The current calculations are not transparent enough.
3) There are a number of claims above that hedonic adjustments to CPI do not adjust for negative changes in quality – that is, it is a unidirectional adjustment always and everywhere. Can anyone state for a fact that is true and show me a link or reference? I strongly doubt that this is the case: and if jeans fall in price by half but last 2/3s as long, that is still an improvement – ceteris paribus – and it may well be that this adjustment is taken into account.
4) There are a lot of comments about deterioration in service quality – anyone discussing this has to keep in mind that this can be (and probably is) just a relative price adjustment: labour has become more expensive _relative to_ other things (capital, inputs, etc). So the service component embedded in other products has been cut back. This may or may not be included in hedonic adjustments, but it is a normal thing for a society that gets substantially more wealthy. And if consumers have a choice of expensive service or minimal at much lower price, they frequently choose the no service packages – rather effectively demonstrating that they don’t always value that service highly. For example, I get much less personalized service at my bank now but it is 10X more efficient than 20 years ago and available 24 hours – I would hate to go back.
5) I agree that quality of food has gotten worse (tomatoes in North America mostly suck), but availability year-round is a huge change in only a generation or two (younger folks don’t remember this – mostly happened after the war). Same can be said for juices, etc, where corn syrup dominates. BUT: this is also a matter that is somewhat specific to the US and Canada. Real food in much of Europe is available, particularly in season – more expensive but still reasonable (and I believe nutrition statistics are beginning to show this difference). There are policy choices available, and this probably should enter into hedonics/dedonics (and for all we know, may well do).
My biggest issue with hedonics is the trust/transparency issue. Frankly, it is impossible to do these calculations in a way non-specialists would trust. And any specialist would admit this is an impossible task, as even the CPI is a definition weighted to some arbitrary “average” consumer.
I think it would be much more honest to peg everything to CPI _minus_ some figure (like one per cent), and admit it’s a guess. And give the one per cent back (at least) to the poorest.
Wow. All I can say is that there is enough material for at least one book in all these great comments! Call it “Pissed off America”?
Food. Eat homegrown food and food bought from supermarkets, mass produced. There’s a huge difference.
Legal services
Food
Airlines
…pretty much any service that the bean counters have forced into competing as a commodity
“What aspects of the modern economy have resulted in product degradation?”
The Federal Reserve, and, its Duopolistic partner, Big Government–ripped from its Constitutional moorings..
My point, above, was to delineate the Cause, itself, of the widespread Product degradation that we, all too readily, witness in our daily travels.
And, to simplify, Thomas Jefferson did us a great favor by leaving these reminders:
“We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds…[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers… And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]… till the bulk of society is reduced to be mere automatons of misery… And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.”
http://quotes.liberty-tree.ca/quotes_by/thomas+jefferson
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations
that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
–Thomas Jefferson
“The system of banking [is] a blot left in all our Constitutions, which, if not covered, will end in their destruction… I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money
to be paid by posterity… is but swindling futurity on a large scale.”
–Thomas Jefferson
we should note that it the Federal Reserve that ‘Banks’ the Debts, created by our Federal Government, that are then turned, by Fiat, into our Currency..
The quality of television display. In the past, sound was never out of sync, and the image aspect ration was maintained religiously. Now nobody seems to mind watching short fat people talking two seconds before themselves, or is this just the public saying that TV presenters have become too thin and retarded ? Also, volume contol knobs: you used to be able to turn them to the level you want, now you have to count key presses and pick one of the available levels.
High tech autos overloaded with electronic/mechanical junk.
Highways instead of Main Streets.
Cell phones replacing civility/social interaction.
Security services.
airline service-they suck and get suckier as time passes
Why is it that your parent’s major appliances have worked for 20+ years but yours tear up after three or five?
The quality and workmanship of bensteinery has certainly declined from its days as a “one hit wonder” in the 1970s.
If he had a game show called “Win Ben Stein’s Credibility” then the prizes would really suck.
To the one who asked about where I get tomatoes off the vine, I live in a rural area where home gardens are very common.
To the one that brought up flash ad burdened web sites, this is a huge peeve of mine. So much so that my own website (shameless plug – http://www.iridescentdreamscapes.com) has NO advertising and doesn’t even set cookies. Hopefully I can keep it that way.
Here’s one I haven’t seen mentioned. Trading older, experienced workers (high paid) for younger “fresh” workers (lower paid). This is not a dig at the intrinsic abilities of younger workers, but by the time you reach 50, you’ve learned things through experience that can’t be had any other way.
“… the women keep getting more and more beautiful every year.” — rebound
Dunno whether this was intended seriously, as the aesthetics and quality of intimate companionship do not enter the CPI. But it does raise a serious point.
Even if the top decile of ‘beautiful people’ are becoming ever more handsome, the bottom three deciles unquestionably are becoming more obese.
The CPI includes health care costs. And to the extent the population is becoming less healthy, health care’s percentage of the CPI may rise. But where is the ‘dedonic’ adjustment for reduced quality of life — for all of those person-years spent miserably with chronic ailments, feeling bad, looking bloated, moving sluggishly with reduced mobility? This may have something to do with the quality of food as well. Clearly the quality of life has declined, in a nation where 30% of people are obese, sharply up from a generation ago.
That’s why I planted my own garden, pick my own veggies, buy what I don’t grow from my local Farmer’s Market and only consume meat’s grown in my home state when possible
——————
Even then, you must add topsoil… do you know where it comes from? Do you get it tested?
In 1992, the Honda Civic was been advertised at 9999$. Today the base model is twice that amount but have you ever tried getting the base model? Nobody has it in stock, you’d have to wait months to get a special delivery.
The other thing about hedonics, it does not account for “class inclusion”. A few years ago, my peers would have been buying a Jetta or a Camry but all of a sudden there was a move toward luxury cars such as BMW, Mercedes, Saab, Audi… The price of a Jetta or Camry might not have changed that much but if I bought one, the purchase of such a car would have looked like I was in a class below my peers. I doubt this fact is considered when applying the hedonics adjustments.
Great comments all (well. . . almost all)
(1) Food – This industry is a joke. Nutrition has been removed to save costs and the consequent costs (in terms of healthcare) are through the roof. Drink your “juice” that has no juice. Let your liver try to deal with all the HFCS. Eat your shiny apple covered in shellack, which was harvested in NZ 2 years ago. Your meat which was fed corn (no nutritional value), then treated with antibiotics because cows are meant to eat grass, given and growth hormones, and lives its life in a 2 foot radius, swimming in crap. Then pay more to buy “foods” that have been enriched with the Omega 3s that we used to get naturally in our meat and veggies. And pay a premium when manufacturers use the recipes and ingredients that they originally used. And the shrinking portions are a game all are playing. Processed “food” is the devil and it is so hard to avoid.
(2) Banks – Great new services. So convenient. But they pay us what % rate when they borrow our $ and charge us what rate when we borrow theirs? And look at the fees that have been added over the past few years.
(3) Automated attendants on phones for cust svc calls. Needs no more explanation.
(4) Airlines – Let’s take an experience that is negative for most consumers and make it even worse. That’s a roadmap to success.
Ahh – venting is fun. Back to work.
Asian farmed fish and shrimp are cheaper but the experts say don’t eat ’em. They are supposed to be full of pollutants and over-used antibiotics. Nonetheless, I assume they are holding food inflation down.
Straws in the wind…
Every restaurant that Mrs. Uncle Jeffy and I have been going to for more than a few years has been cutting back on portion size, product quality, or both. The portion size cutbacks aren’t so bad (otherwise I wouldn’t be at Weight Watchers), but in a different environment, we might expect them to be adjusted for via lower prices. Not happening…
People complain about airlines but if it wasn’t for subsidies and overpriced markets, a correctly priced ticket would be unaffordable for the masses and the network would be half the size.
This is one industry that has not been able to break a profit over the long term.
The reduction in the quality of our purchases is our own fault. Many of us are willing to buy based on perceived value rather than paying the extra price in money and due diligence for real value.
I am typing this on a keyboard that is built using the original IBM keyboard design because I refuse to use any of the flimsy keyboards commonly offered.
Top quality products are available, we just have to search them out and pay a bit more.
People, there is nothing wrong with hedonics. The problem is the BLS very carefully counts each and every quality upgrade (that’s hedonics), but they refuse to count any quality downgrades (de-deonics).
Take computers for example, they really do run 2x faster as a model from a couple of years ago, so the price should be 1/2. BLS does a nice job of this. My congratulations to them.
However, the government refuses to measure de-donics, this pisses people off.
So your software has 2x as many lines of code, and requires 2x as much as computing power to run. Therefore the computer price should not decline by 1/2 and it should remain flat. The BLS ignores this and it makes me crazy.
David makes a good point.
Hedonics should only be valid if the base model is available. If I can purchase a car for $4000 without all the bells and whisles then it is fair to count the hedonically adjusted car. If I am forced to purchase all the bells and whisles then the notion of quality adjustments falls apart.
Movies. The government refuses to count the de-donics in movies. Using de-donics we can proved that commercials run in movies adds a full 1% per year to movie ticket prices.
Airlines. So you used to have 15 inches of leg room, now you’ve got 12. Where’s your 20% quality loss? And corresponding 20% inflation? Eat tarmac.
Give me all the hedonics in the world as long as I get all the appropriate de-donics.
Oh by the way I didn’t used to need a burglar alarm system and spend so much on lawyers. Throw all that into the inflation stats and tell me what inflation is now.
Corn syrup in Coke Classic.
Flavorless fruits and vegetables.
re: year round availability of fruits and vegetables.
Very nice, until you buy them and realize they’re just eye-candy. The wonderful thing about seasonal items (experienced living in foreign countries) is how good they taste when they’re in season.
Top quality products are available, we just have to search them out and pay a bit more.
That just means prices really didn’t drop, quality was lowered, which is the point.
Oh yeah, two words: High Fructose Corn Syrup.
Products don’t last as long as they used to. My first TV set lasted 20 years, my second one lasted 7 years and it was a Consumer Reports “Best Buy”. My point is that we have to buy products more often, which, in the long run, costs us more money.
Healthcare insurance? BCBS has about 240 options now and most of them are worthless. I know in my case, and I have one of their most “decent” plans for a family of four, in a worst case scenario I would have to come up with 40K (assuming they pay what they are suposed to pay) after paying 11K a year in premiums. I think most people that buy health insurance now days do it for the illusion that they have some coverage.
Lots of things have gotten worse, but price competition has reduced the price of previously unattainable items in the premium or low-end of premium part of the market. For example, 90% of my clothes comes from Lands End clearance. You wanna know what didn’t sell last Summer? Look at what I’m wearing this Summer. Much higher quality than you’ll find in any store. I save up enough wants to buy a quantity that is exempted from the shipping charge. Maybe Lands End isn’t what it used to be–I dunno. But, it’s far better than anything in most stores or from premium stores at full price. I don’t get that much satisfaction from my clothing. As long as my wife says it looks okay, I’m good to go. I finally convinced my wife to do this with her favorite brands. (She gets to buy more items at the lower price instead of less at the higher price.) She jumps on the discount e-mails–and we get many! I think the discerning buyer can do much better these days on most–but not all–items. If the plebes want crap, be my guest.
Let’s chalk this one up to the ‘great’ Bob Nardelli.
In order to SAVE TIME, I go to a Home Depot & order a gallon of paint. I leave to pick up my daughter & come back & guess what? No paint. So I have to find the color (because the woman who took my order also took & lost the swatch) & order the paint AGAIN & of course wait for the mixing & shaking. I mentioned to the clerk that this was not good considering the economy, especially the home improvement market & two of their competitors across the street.
It doesn’t end there. Mind you, in this recession during the middle of the day on a weekday the store is basically empty. On the way to check out I pass by a number of employees talking to each other but when it comes time to pay for my paint all I see are ‘self-checkout’ lanes. I find ONE live human being to check me out & his English was so poor I felt sorry for him.
Good luck Chrysler/Cerberus.
Bottom Line: We know all of the factors that are affecting the economy negatively but this instance points to another reason; Businesses themselves are so #$%^%^ poorly run!
Hedonics my ass. Why not take a weighted average basket of consumables? Rent, Utilities, Transportation, Gas, Food, Insurance, Taxes, Entertainment, Etc, … & average the prices in the 10 largest US markets & use the change as CPI. Pretty cut & dried and also simple me thinks.
Interesting 2000 article on Bush, hard to believe the detailed predictions have ended up so close to reality.
I feel I’m getting close to gyofb territory.
Latest Ultra-portable Fujitsu computer.
I’ve gone through two previous generations happy as a clam, now comes the new one and in every way but the price and a bright new screen, it’s a step backward.
(How about a fingerprint sensor that’s also the scroll wheel? Ha.)
For years I thought I’d never own anything but a Fujitsu but this baby’s about to be history.
In the manufacturing sector there is always a cost ‘squeeze’, usually after the introduction phase of a new product. This is the perenial attempt to ‘decontent’ the product to reduce cost and improve profit margins. This can be as simple as resourcing components to a less technical supplier (or geography) who has lower labor rates with less automation; eliminating low usage options on the product with associated overhead; downsizing part thicknesses and attachments or substituting alternate materials/lower cost; avoiding higher ‘burden rates’ by ‘modularizing’ assemblies to outside suppliers. The issue is evaluating “value added” to the product and where OEM uniqueness can be optimized and generic components can be ‘off the shelf’, that is – technology only where it gives you product advantage over your competitors. Best way to do this is ‘benchmarking’ the product base and access what’s needed to beat your competitor.
Example of technology reversal. Designed for robotic assembly of a vehicle’s interior. By the time we designed to meet the robotic requirements (ie. everything up or down, limit sideways, projection, and rotations) we eliminated enough labor content that there was little value in robotics (approx. went from 41 people and 2 supervisors to 24 people and 1 supervisor with substantial assembly quality improvements). Basically the robot didn’t take a coffee break, but required a higher level of skilled labor for maintenance.
Welcome to my world. RoyS