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January 19, 2006

Comments

dearieme

Spangle wrappers were so handy for fixing the windscreen wipers on Morris Minors. Bet the index doesn't allow for that.

Maynard Handley

You don't have to go to anything quite as subjective as the eggs.

Does hedonic pricing track the pretty-much universally agreed upon *substantial* decrease in customer service over the last 15-25 years? (This has nothing to do with complaints about Indian call centers --- they have never bugged me. It has to do with ever more insulting phone menus "for your *convenience* we have ...", ever longer wait times, ever higher likelihood of being disconnected while on hold.)

Does it likewise track fallout from these matters like the *substantial* increase in identity theft (which is surely a commercial matter, given that the financial institutions could do something about it if they made the effort).

Is there information on whether hedonic pricing *ever* is used in a context where it would reflect a decrease rather than an increase in quality?

John East

Put yourself in Brown or Greenspan's shoes. You desperately need high inflation to bring down national debt and deficits, and you desperately need low inflation to minimise annual index linked cost increases such as pension.
Enter hedonic RPI analysis. The answer to a con man's prayer.

dearieme

The other distinguished economic thinker called Maynard, John: quite right, boys.

dave heasman

Real interest rates on government bonds of about 1% allow Brown to be relaxed about debt, surely?
And I recll Hamish McRae saying that a component of various indices where the quality was declining visibly was clothing. Not sure if that's still - in the last 3 years - true, but I know that shoes of the 60s lasted longer & wore better.

Jonathan

We don't 'need' inflation at all.
Read Mises 'Human Action' or look at historical periods of hard money. They were characterised by 'good deflation', the kind we dont complain about when paying half the price for a better spec'd 42" plasma this year compared to last year's model. The deflation we fear is a direct consequence of the deliberate debasement of the unit of currency, e.g. currently bogeyman being house price falls but think about 1929, or dotcom crash etc. Preceded by extreme credit/money creation and hence asset price inflation/speculation.

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