So, I was going to write a state of play economics article today, but I can’t. Well, I could, but the article I originally intended would take a couple days of work, because I’d have to construct my own inflation indexes.
It’s reached the point where I completely don’t believe the American inflation numbers. I can’t use them. They’re in cuckoo-fantasy land. That means I can’t use the inflation adjusted wage numbers or price numbers, which means that to compare wages and their actual purchasing power I either need my own index or I need to take raw data and do compare and contrast series. I might do that one day, out of sheer cussedness, despite the work.
A good example of how broken price indexes (and thus inflation is) is the inflation in automobile prices. You will be relieved, and perhaps amazed, to know that automobile prices are flat for the last 20+ years.
This is based on hedonic adjustment: you see, cars are just that much better now, so all the nominal sticker prices increases haven’t actually happened because you’re getting more car now.
Maybe you are, maybe you aren’t, but if you don’t have a car you can’t drive one where you need to go. Something similar is done to computers, but my computer today is not much better than the one I had 20 years ago. Really, it is only better at pretty graphics, in every other way it is effectively as good at web surfing, word processing, spread-sheets and so on as it was then. In many ways I could argue it is less functional, it works less well than that computer did.
The truth is that for decades the prices of everything that matters: transportation, housing, health care and food has been rising in the prices actually paid by most people and rising faster than most people’s wages. But when you look at a real wage chart it shows that wages are rising faster than inflation.
This is wonderland-level bullshit. It is fantasyland “emperor has no clothes” mass pretense.
Meanwhile places like the Fed and Treasury are basing policy on these numbers. “Oh, we need higher inflation” they squeal as the ignore the massive inflation in every part of the economy where a seller has pricing power or where they themselves have created a bubble. “We’ll use rent equivalent as a proxy for housing prices” they spewed as the housing bubble went its merry-way, because “the economy behaves as if it were what we want it to be!”
So I go thru these numbers over at FRED and I can’t use half of them. They’re just lalaland garbage, completely disconnected from reality on the ground.
Then you’ll have some reporter ask a politicians “so what does a banana cost” and they have no idea, because they don’t do their own shopping and haven’t in thirty years.
Lalaland. More delusional than the Red Queen or the Mad Hatter.
There are many ways that elites are completely disconnected from the consequences of their decisions, and one of them is that the systems designed to report to them conditions are so broken and corrupted that they are providing completely erroneous feedback, “inequality’s high, sure, but honest, most people’s wages are actually rising after inflation so it’s just not that big a deal.”
BULLSHIT. Absolute bullshit.
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Dan Lynch
Yes and no.
The gold standard for the real value of wages is how many hours you have to work to buy a barrel of oil. In that respect, inflation has been negligible.
But housing costs have gone waaaaay up.
The cost of college has gone waaaaay up.
The cost of health care is waaaay up.
Meanwhile, the minimum wage has not gone up for decades.
Those four things are highly influenced by government policy, so those are choices, and we as a society could make different choices (if we were actually a democracy, which the U.S. is not).
Certain people are benefiting from the housing bubble. Certain people are benefiting from the higher education bubble. And certain people are benefiting from the U.S. health care system. Those people will fight tooth and nail to maintain the present system. As for the working class, it’s easy to keep them fighting among themselves over social issues. It’s almost like, if social issues did not exist, the powers that be would have to invent them.
GlassHammer
Who needs realistic inflation metrics or reasonable prices when you have credit?
Make one payment, make three payments, make all but the last payment, it doesn’t matter.
No one cares if you ever own anything.
This is the credit economy.
Take a 30 year mortgage out on a bicycle, we will slap an iPad on it to make you feel better.
Temporarily Sane
American society is drowning in bullshit. From economics stats to news stories to pretty much all of politics it’s lies, lies and more lies. Sometimes it seems like politics and news reporting have become nothing but a massive obfuscation operation designed to hide the truth from the American people. My gut feeling is the chaos and unreality that prevails is not going away. This is what collapse looks like. It’s not a onetime catastrophic event like an earthquake or a hurricane but a slow process where things that used to be considered normal and taken for granted change for the worse and never regain their former shape.
Ten Bears
Not unlike how Fascism sneaks in the back door, TS, in increments.
Only one small, barely outrageous step at a time.
StewartM
As the article said, hedonics only make sense if one also the option to buy a new 1996 Taurus at $17995 or a new 2000-technology computer in lieu of a 2020 one. Other than that, it’s BS.
If inflation is really running even one percentage point or so higher, what that means is that the Golden Age of Reaganomics/Thatchernomics *produced very little or no real economic growth*, and all it really was was camouflage to hide a massive wealth and income transfer from everyone else to the top 1 %. Even if you assumed the CPI is valid, the real growth rates under neoliberalism are worse than those of the much-maligned 1970s, and look positively sick compared to those of the FDR economy of 1947-1973. That flies directly contrary to the promises that were made in the 1970s and 1980s that lowered taxes on the rich, deregulation of the financial markets, and the ‘disciplining’ of labor would create an “innovative” economy where growth would explode.
Stormcrow
About computers …
CPU speed hit a wall in the early oughts. That problem won’t go away until and unless the whole industry goes to a new substrate; it’s a “silicon” problem.
But functionality as a whole nevertheless improved slowly, over the course of the decade, as memory density increased. I notice things like that because I beat the holy living bejesus out of my machines. If they were people, I ought to be in jail.
Most people’s computers aren’t all that much better today than they were in 2010 because they’re buying the same sort of builds. Memory on OTS 2020 systems these days is 8-16 GB, which is nothing short of pathetic compared to what a decent modern motherboard can support. And most of the systems are 4 core.
But in 2013, I ran up a build that was close to state of the art for that year. 6 core Intel proc on a motherboard that would support 64 GB. And I maxed out that motherboard.
Consequently, I have a system that’s still curst hard for even me to saturate. It won’t run any faster than a 2005 system on a single core, but you can run far more apps simultaneously than you could dream of in 2010.
Then AMD got back into the game, after a decade of stagnation. Intel had been coasting, and it showed. AMD started pushing out consumer CPUs with core counts that had Intel sucking wind, 16, 24 and 32 cores, and a motherboard that’ll handle one of those CPUs has memory capacity increases to match.
Consider a system with a 24 core AMD CPU running with a 4 Ghz clock on a motherboard hosting 256 GB of memory, which is easily achievable today but was practically impossible 5 years ago.
If you’re using a computer as a single-tasking machine, that buys you nothing. But if you’re running half a dozen browser instances (not windows, but actual separate processes operating in separate memory spaces), it’ll buy you a lot. Throw in a few virtual machines, and it’ll buy you even more.
Ian Welsh
As you say, it buys most people nothing. For the purposes 90% of people use computers for, other than gaming, they aren’t significantly better than 20 years ago.
Heck, the internet runs worse, by far (I know that isn’t down to the computers, but still.)
That said, I have an 11 year old computer that I need to replace (because it will brick if I try to update it to Win 10.0 It has lasted me 11 years because in 2009 I bought what was then, mostly, the best, since I was flush at the time.
Hugh
This is important. Understanding any economic stat depends on a precise as opposed to commonsense definition of what is being measured, and the how and sample size of what is being measured. I learned about this studying labor economics on my own. For example, a job is not the same as employment. They come from different surveys of very different size/populations conducted in different ways, usually presented officially in an unrealistic (seasonally adjusted) manner. And while longer term/older data can be interesting, there’s a real question how comparable the older data is to the newer data, and how much the newer data are being stuffed in whether they fit or not, whether that older economy exists or not.
Of course other things like job quality aren’t measured at all. At the same time economic numbers are reported unquestioningly by clueless “experts” with all the religious awe and fervor of Moses carrying the stone tablets down from Sinai. And this isn’t just some economic data. It’s pretty much every economic stat I have ever come across.
Geof
A comparison with cars illustrates why, for most purposes, computers have not gotten better.
The essence of a car is mobility. If you need to get to your job in Ferguson, Missouri, nearly every other feature is irrelevant. Most enhancements are nice but unimportant. Only a few of other things matter: safety, reliability, maintainability, environmental impact.
Car mobility has not changed. Safety has improved. Reliability has also improved – but is partly cancelled out by a huge reduction in maintainability. It used to be you could do it yourself; now you must rely on proprietary technology and specialists. Emissions are lower, but the cost of all these other systems increases lifetime costs (and the chance of breakage). Meanwhile, cars have been replaced with SUVs – which the inflation calculators would count as better value for money, but which are actually net negative because of the environmental hit.
Obviously the essential service is what matters. All else is gravy. What are the essential features of computers? Unless you’re an artist, I would say the list is short: writing, spreadsheets, email, web browsing. Over the past 20 years, other than web video, there has been little improvement in these areas.
I would argue that writing and email have actually gotten worse. Text-based editors and word processors emphasize the content of writing. Graphical ones emphasize style – which, even if you don’t care about it, is continually messing up. Moreover, text-based tools have expressive capabilities that do not fit with the graphical mode. I use vim for writing. Its roots reach back to the 1970s, but the power it offers for manipulating words is miles ahead of any GUI word processor. It takes three keystrokes to delete a sentence, one to move past the next sentence, one paste the deleted sentence back in the new location: das)P. Does Word even have a concept of navigating and editing by sentences and paragraphs?
There is an even more fundamental weakness of new technologies: they displace human skill. Just as we can no longer maintain our cars, we are at the mercy of our computers. We say that GUI word processors are easier to use. For easy things, they do (usually): but complex thigs are difficult or impossible, and then Microsoft changes the interface. We do not master our tools: they master us, and we think it is a good thing because we call it “intuitive.” This is even more apparent with smart phones, apps and social media, where we are often literally the product.
I doubt inflation numbers account for environmental impact. I’m sure they don’t account for loss of independence.
Mark Pontin
Since the 1980s, something like 90 percent-plus of all GDP growth in the U.S. has been in the FIRE sector. (That may be a conservative estimate.)
Mortgage lending and extending credit to purchase assets already in place have relentlessly pumped up their prices, which means prospective homebuyers take on larger mortgages to obtain homes and businesses pay more of their revenues in debt interest.
As these payments siphon more and more of the revenue of consumers and businesses from consumption/new capital investment in the real-world economy off into the fictional FIRE economy, the effect is deflationary for the real economy’s product markets, and hence for consumer prices and employment, and therefore wages.
And that’s how we can have massive asset price inflation and *apparently* low CPI inflation. The two trends are one.
Dale
Need some help here. Don’t our government experts not count certain commodities when estimating inflation rates? The ones that come to mind are food and fuel costs. They must also leave out health care and insurance costs, school costs, etc. for years they seem to be increasing in double digit rates. The percentage of one’s income paid out for them is increasing dramatically. A way to hide this is to decrease the weight/amount of food in a container.
GlassHammer
You know even if the car was worth it’s price, the poorly maintained local roadways and the horrendous congestion inside city limits would quickly remind me how little the car itself mattered in getting me from point A to point B on time.
Buying a golden link for a broken chain seems like a poor use of money.
nihil obstet
@Dale, the first time I heard of hedonic adjustment decades ago, it was about food. The price of prime beef goes up, so the family switches to hamburger. Therefore, inflation isn’t a problem faced by families. Every year they all switch to hamburger.
If you’re looking for productivity, the winner is the production of bullshit.
anon
U.S. used car and truck prices rise the most since 1969
Used vehicles are 12% pricier than they were two months ago
https://www.autoblog.com/2020/10/13/used-car-prices-rise-consumer-price-index/
The markets are not reflecting what is happening on the ground. All of this – the stock market and real estate market – will eventually blow up soon. There is only so long the markets can be propped up during the Great Depression 2.0.
different clue
I have heard of a thing called Shadowstats, which I gather tries to study the government statistics in light of everything discussed above and tries to come up with some reality-adjusted reality-reflecting real statistics.
Has anybody here heard of it? Does anybody here know whether it succeeds in its putative mission? Or are the goverstats such creative and unpredictable bullshit that Shadowstats finds itself stuck in a tar pit of deceit in a wilderness of bullshit mirrors?
Also, does anyone know of any country’s government which releases more reality-based less bullshit-based statistics? If there were such, we could look at them just to learn what more-nearly-truth-based realistatistics even look like.
different clue
I forgot to include the link to shadowstats. So here it is. http://www.shadowstats.com/
Zachary Smith
Bullshit Economic Statistics
I agree – there are virtually no ‘numbers’ I trust anymore. Prices of things I must buy are constantly going up, and often package size shrinkage happens at the exact same time.
Here We Downsize Again – Summer 2020
Sometimes the product is smaller, or lower powered, or just more cheaply made.
Automobiles: I like ‘new car smell’ as much as anyone, but I’m unlikely to indulge. My fourteen year old vehicle can’t be easily hacked, so I’m unlikely to lose control of the steering or accelerator mechanisms to a pimply faced moron. It won’t get pronged any worse from a deep Indiana pothole than a car made this year, and the repairs are likely lower. (In any event, I cannot afford to walk away from expensive repairs with the “NEW” car) Fairly recently I picked up a backup car, and it’s even older. I’ve even hit up an elderly relative who will not be driving much longer to get first dibs on his 20+ year old car. (low mileage, pristine condition)
Computers: I’m typing this on a machine which must be at least 15 years old. It has an Athlon 5200+ dual core CPU and a 20-year-old 20 GB hard drive. It cruises the Internet Tubes just fine with a Ubuntu operating system. My other computers – the ones I work with – are mostly equipped with XP. They’ve never been connected to the Internet and never will be. A local relative uses Windows 10 on a big, new, and very fast machine. The freaking thing is slower on the internet than this one!
Back to inflation – I really don’t think that issue is going to end well.
Hugh
different clue, there are organizations like the OECD (Organisation for Economic Co-operation and Development) that track data from multiple countries but they tend to have the same problems in their definitions as the US does.
I like using examples like what would be the effect on unemployment if a million prisoners were set to making license plates, toothpicks, whatever. Or the effect on employment if 5 million people signed up to join the army. The answer to both is zero. The employment survey only covers the civilian (not military) non-institutionalized (not in jail) population. And that’s the trick. What they are presenting does not reflect reality. We have to go back and figure out what relationship their data have, if any, with reality.
StewartM
DC,
Shadowstats is almost certainly bogus. And I say this who agrees that hedonics is mostly BS and the CPI understates the true inflation rate. Look at the Shadowstats inflation rate compared to the CPI, and you see that it mirrors the current CPI at every up and down swiggle in the data.
https://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/
“What I do disagree with is bad statistical methodology. Shadowstats is built on the belief that the Bureau of Labor Statistics changed their methodology in the 1980s and 1990s, and that if we were using their original methodology the level of inflation would be much higher. Shadowstats presents what they claim to be the original methodology. But Shadowstats is not calculating inflation any differently.They are not using the 1980s or 1990s methodology that they believe would be higher. All Shadowstats is doing is taking the CPI data and adding on an arbitrary constant to make it look like inflation is higher!”
Here is what I think is a thoughtful criticism:
https://www.thestreet.com/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists
One of the things that I openly wonder about in the CPI calculations is that–ok, let’s say that some items like cars, and tires, and other good do last longer than their predecessors due to improvements in quality, and these improvements can be captured using measurable metrics (his example that a tires used to last 30,000 miles and now they go for over 60,000 miles; or an example on cars (a topic of this post), that the so-called ‘classic’ cars of the 1950s and 1960s would often be junked after 100,000 miles, while I know of people who have driven cars 200, 250, or even 300,000 miles). But what about the reverse? We all know that quality doesn’t always go up, but can go down as well. In Asia I have bought umbrellas for say $6 that last years of use, while pricier umbrellas bought in the US fall apart or break after a few uses.
Does anyone checking for declines in quality in calculating hedonics, or do they just assume “newer is better”?
different clue
@StewartM,
Well, so much for Shadowstats, then.
It looks as though us mere seeking-after-wisdom citizens will have find a way to join forces of several tens of thousands at least of relevantly intelligent layfolk who can do their own finding-out of non-bogus ground-level facts and figures and impressions and figure out how to create a sort of truthful and accurate stick figure diagram of real economic conditions with whatever a pack of layfolk can find and assemble and analyze. Because it seems that the professionals are devoted to preventing anyone from learning or understanding anything reality-based about anything body political-economic.
A little almost-dangling side issue towards the end of your comment is intriguing. The umbrellas you could buy in Asia were actually better than the umbrellas you have bought here in the US? Where exactly were those bought-in-Asia umbrellas made? By what company or companies? In what Asian country/ies did you buy them? And those inferior bought-in-USA umbrellas . . . were they made in the USA? If so, by a domestic or a foreign owned company? Or were they made somewhere else and only bought here? What brand were they? ( And then we would have to research whether any made-in-USA brands still exist here. And if they are made by a US owned or a foreign owned company).
The deliberate degradation of made-in-America product only deepens the disadvantage such product faces against less-degraded foreign product. Mainstream corporate toxifood made in America may well be inferior to mainstream less-corporate less-toxic food made or grown in Europe. That is a problem. ( Some sidestream eccobio-correct non-toxic nutri-food is still made here/ grown here by artisans or smallest-size mainstreamers. )
bruce wilder
Does Word even have a concept of navigating and editing by sentences and paragraphs?
Sure it does. Double-click to select a word, triple to select a paragraph, ctrl-click to select a sentence. It was designed around the paragraph as an object to which formatting is applied via a pointer. Text and formatting are managed separately and independently.
Word docx files also have an open xml version of the content, so structure and meaning can also be marked up and managed transformatively.
different clue
Here is a very sad example of the gratuitous degradation ( what Lambert Strether has decided to call ‘crapification’) of a product for no reason that I can understand at all.
For decades there has been a small health-food company called Bragg. They made Bragg’s Aminos and Bragg’s Apple Cider Vinegar. I liked the Bragg’s Aminos because it was a somewhat different process than soy sauce making so it took the soybeans in a different taste direction. I liked Bragg’s Aminos and the various Soy Sauces both. Recently I bought some Bragg’s Aminos and had to spit it out. It seemed too salty to bear. So I looked at an old legacy label I had and I saw that Braggs had near-tripled the amount of salt they put in the product. Now why did they do that?
Eric Anderson
History shows that non-replicable “sciences” are often co-opted into the service of political propaganda. Add, that this particular pseudoscience studies the root of evil and then faint in surprise to find it’s all rigged by the elite.
StewartM
DC,
To answer your question about umbrellas…I bought them (two, I think) in Taiwan. I assume they were produced there (I think I lost one, which is why I had to buy another). The US umbrellas–well, the best and most long-lasting one was given as a reward by my company, and the others I bought at grocery stores or whatnot and don’t know where they were made. Like I said, one fell apart after like *3* uses.
The reason why I think the difference is this: Asian customers don’t put up with inferior quality, let alone crap. When a Taiwanese friend visited me about five years ago, and bought a polo shirt at our local mall, he took it back and exchanged it because of a tiny error in the sewing in the back I frankly would not have even noticed. Those are their standards.
I think domestic good are often poor quality, but it’s not the workers. In Asia, as I once heard about Japanese business culture (at least the way it used to be) the priority was/is “taking care of customers is the first priority, taking care of employees is the second, while taking care of investors is the third”. Here, due to Milton Friedman, it’s investors and nobody else. Businesses managers here cheat both customers and employees to further short-term profit. It’s due to our MBAs and not the UAW why GM is no longer the world’s biggest auto company (hey, Toyota took over a GM plant in California, known for “sex, drugs and defective vehicles” and almost turned it overnight into making GM’s highest customer-satisfaction cars!)
https://www.npr.org/templates/story/story.php?storyId=125229157
Going to Asia spoils you. You walk into a restaurant, or any type of business, and you get waited on and serviced quickly. Here you go into say, a Subway, and you join a long line watching two overworked employees try to keep up. They by contrast would have at least four or maybe five people doing the same job so that everyone would get their sandwich within five minutes–I kid you not. Yes, their wages are about 60 % of ours but the corresponding prices are often half (sometimes a third) of ours. And their businesses make money too. Here *everything* must be cheap to better feed the Wall Street maw.
This applies to government service too. Once, in Taipei, I went with a friend to get his biometric passport updated. Him being him (a big-time procrastinator) he was late and we got to the government office late, about 20 minutes before the place closed. The place was *packed*, like wall to wall people. Yet they had plenty of workers, including people whose job was to stand around and just answer questions like “what do I fill out?” “what do I do next?”, and we were in and out in *15 minutes!*.
Can you imagine your local DMV giving you this kind of service? Like I said, you get spoiled, and you come back here and see the crap that US customers have to endure and how inadequately our businesses are staffed, and you find it frustrating. This is also why I say immigration is not a problem because experiencing this makes you realize that “hey, if we staffed our businesses and government agencies at the same level they staff theirs, there’d be plenty of jobs for everyone”.
DMC
Case in point about the degradation of the food supply,when we first moved to Europe,I was amazed to find eggs being sold without refrigeration, just stacked on shelves. Turns out that this is perfectly fine,assuming their shells are up to a certain level of cleanliness, which the US egg industry is unable or unwilling to match.
Steve Ruis
And when a bill hit the hopper to adopt a better system of number gathering, a la what Canada does, you can just guess what the response was. (It was killed, of course, in that both parties benefit from number that are one way and when corrected two months later show something else entirely.
Stirling S Newberry
There is some good news in the hedonic adjustments – people die less. In almost every single case, your people die and therefore people live longer. Now whether this is appropriately accounted for under the hedonic adjustments, is a completely different story – one that some Ph.D. or other look to, but it does not a complete loss of value. It is just one that we have not examined the curve for. Of course, the weapon sales in the US means that it is also not the primary mission of our elected an unelected officials.
Remember that the real reason for the hedonic adjustments is because they have no idea on how create real value, we just get live longer in a universe where other things are just not going to happen because the default is billionaire class has to more of the money. So even if the value that they do create is of a negative kind – we’ll live longer and vote for more conservative governments keep the agent living longer and still. And what is funny is that we have PhD’s to make us live longer still, apparently we like living in a broken society which is stuck on its planet of origin. This is not the case for people who live slightly less long and smoke more.
Tl;dr: the value we get from a hedonic adjustments is both unmeasured and entirely real, it is the replacement for value that is what the real population wants, but it is at least value that we can deliver.
NL
I could not suppress a chuckle reading this in Foreign Affairs:
“Nothing is as important to competing effectively with China as what the United States does at home… Policymakers must get the COVID-19 crisis under control, implement economic policies that benefit all Americans, welcome immigrants…, pursue racial justice …, make smart investments in U.S. defense capabilities, and scale up federal funding for research and development.”
(https://www.foreignaffairs.com/articles/united-states/2020-10-13/china-thinks-america-losing)
This not going to happen. El-Erian (who is much worth of listing to these days) is now talking about ‘re-sizing’ by which he means ‘down-sizing’ of the economy. Reading about how the oligarchs are buying up large mansions, I now think that many services and hospitality workers will transition from restaurants, hotels, salons, etc to these mansions and become servants, cooks, handyman, seamstresses, etc of the neo-feudal lords. Many will live on the premises and undergo regular testing for the coronavirus, so as not to infect the lords and their families. This will be a new growth industry – what should we call it – mansion services?
The FP article then goes:
“That effort should include using joint economic leverage to punish firms and groups that steal intellectual property and engage in other unfair and illegal conduct; strengthening military capabilities and showing increased resolve in the face of Chinese aggression; and sanctioning institutions and officials that are aiding repression in Hong Kong, Tibet, and Xinjiang. ”
This will not be going on for long either. Who’s gonna pay for the military? There is a view that whatever left of the US industrial economy was hitting a wall before the pandemic because of the Trump’s tariffs and sanctions. China is a major US export market.
The FP article goes on:
“The United States and China also have important shared interests and should strive to prevent the worst outcomes of their competition. …the United States would show Beijing that it does not fear or seek to contain a prosperous China…”
And so this is the end goal, a settlement between the neo-feudal lords and the communists that the US does not interfere with the China’s rise on the world stage and China does interfere into the American devolution of the internal political economy. In this light, the sudden American insistence that Russia and China undermine the US political system (i.e., democracy) and China’s insistence that it does not interfere in countries internal affairs are seen differently. Seems to me that the US oligarchy is fearful that a steady flow of news from abroad would undermine their position at home. RT, Tass, Global Times, China daily, etc, there are now many Russian and Chinese news sources in English free (unlike almost all US news websites) and freely available in the US that show how quickly the world is developing out there and others that are unabashed propaganda (RT). Given the extensive experience of China in erecting an internet wall around the country, it would be kind funny seeing China erect an internet wall around the US at the US’s asking to protect US citizens from knowing what is going on out there.
NL
Glanced at my post and realized I missed a ‘no’.
” China does NOT interfere into the American devolution of the internal political economy.”
NL
Fully agree with
Dan Lynch
October 15, 2020
And want to add, if we were to look at the totally of $ in the world, then the play has been to keep the $ going to the labor the same, while expanding the total pool of $ and directing the newly created money to the oligarchy. The money have been created by creating US federal debt.
US federal government debt is US billionaires personal wealth. Most people do not realize this, and if they did, it would be clear why the debt is growing and will never be paid off.
The number of US billionaires and size of federal deficit follow each other remarkably closely, with the number of billionaires 1-2 years leading the size of debt. The only 4 years when the US debt was shrinking also saw a decrease and the fewest numbers of billionaires (50-70 vs 150 and 270 before and after). 2008 had the largest number of billionaires at 469 and 2009 had the largest increase in federal debt -1.4 billion.
You can find the data here:
https://www.statista.com/statistics/220093/number-of-billionaires-in-the-united-states/
https://www.businessinsider.com/us-budget-deficit-779-billion-highest-since-2012-2018-10
Outsourcing was one scheme to channel money into the oligarchy. However, it was not as effective as crisis-induced money creation of the 2008 and now. Whoever wants to remain wealthy going forward needs to be very close to the FED.
Romancing The Loan
Actually DMC the egg thing is the opposite – unwashed eggs straight from the chicken’s bum retain a coating that keeps them fresh at room temperature, but USDA regulations require that eggs for sale in the US be washed before selling, which removes the coating but necessitates refrigeration.
Hugh
Hedonic adjustment is the replacement of what people want with what our overlords are willing to sell them. Or put more simply: Charging more for less, but calling it more.
There, fixed that for you.
bruce wilder
Don’t you think inflation statistics in the form of one-dimensional index numbers feed on human stupidity and the desire to oversimplify?
How many times have we seen journalists and historians offer an “equivalence” in “today’s dollars” for some amount in 1918 or 1865 or 1790? I am sure some historian has offered an equivalent in pound sterling for a Roman denarius under Julius Caesar.
That there is no underlying conceptual analysis of the unit of account and the extent of the money economy, of economic rent, the proliferation of goods and services, the distinction between durables and consumption goods, or among capital goods, factors and assets, never mind the never-ending political struggle over the distribution of income which must find expression in prices.
Then, there are the periodic changes in monetary regimes, which take place at roughly 40 year intervals, but are often scarcely acknowledged by economists supposedly studying prices and inflation.
No one studying light and vision would consider failing to analyze hue and saturation, luminance, focus, depth and so on. Yet, economists proceed in absurd simplification and people seem to passively accept it even embrace it in journalism.
Stirling S Newberry
> Hedonic adjustment is the replacement of what people want with what our overlords are willing to sell them. Or put more simply: Charging more for less, but calling it more.
No. There is a fine line between paranoia and realism. You are over the line into paranoia.
That charges for some dying are quite large, hence hedonic adjustments are worth something. The problem is 1) we do not know how much 2) we do know whose point of view.
different clue
Because this post is about some of the conceptual and mentallectual barriers carefully placed in the way of a successfully reality-based understanding of economic affairs, one hopes that Tony Wikrent is reading this post and the thread and deciding if he needs to add anything.
Synoptocon
That today’s computer’s aren’t substantially better for the vast majority of users than 20 years ago is mainly because they use them in the same limited ways they did previously. Apply the raw power to new techniques and new problems and it isn’t even close – even comparisons to five years ago are massive changes.
Similarly, looking at private automobiles, the average service life has roughly doubled over the past 30 years.
Ian Welsh
Sure, but the point is most people use computers for the internet, boring productivity software (spreadsheets/text/slides, etc…) and games. And for the ordinary person, it is only games that have improved (though less than you’d think, since most gaming companies go with the least optimization possible and use gains to reduce programming time and improve graphics, mostly.)
As for cars, the bottom line is still “does it get you there?” and while service life is higher, you can no longer service it yourself in most cases (I wonder if that affects the stats? Were the people who ran them longest people who didn’t show up in stats? Don’t know.)
Houses are larger on average than in the past (apartments are smaller, actually), but the same bottom line applies: does it keep you out of the cold/heat and give you a place to sleep and cook?)
Quality improvements are nice, but they don’t replace the question of “does it let you do THE THING that it’s meant for?”
Hugh
What are many things meant for? What is the purpose of a Corvette? It gets you from A to B, but it’s real purpose is to make a statement. Much of our society has been programmed that way. Oh and like most cars, destroying the planet is a bonus.
different clue
About cars . . . several years ago in Ann Arbor where I live at, I stumbled by total accident upon a book signing event featuring Bob Lutz. I had missed the lecture, but I made the book signing.
https://en.wikipedia.org/wiki/Bob_Lutz_(businessman)
So I got in line to buy a signed copy of his book Car Guys Versus Bean Counters. ( Here is a NOmazon link to the book I bought. NOmazon to show it is still possible.
https://www.penguinrandomhouse.com/books/309185/car-guys-vs-bean-counters-by-bob-lutz/ )
And I got to talk to the Great Man for at least a minute. Me! of all people . . .
So I found some interesting things out. Among them, in the Car Industry as well as the Car Business, a car is considered and understood to be not just an appliance to get you from point A to point B. A car is also a personal reflection to yourself of what you believe your inner personal identity to be. And it is also a public display of what you want the Whole WORLD to know about what you want your inner personal identity to be seen as being.
A car is a Three Thousand Piece Suit.
bruce wilder
the utility of the 3000-piece suit or the computer has precious little to do with price of the goods in question, relative to the prices of everything else. Nor does the interval between oil changes or tire replacement or how much RAM your ‘puter has or how fast it boots or how many pixels on your iPhone screen or how many square feet in your suburban manse — these things have fuck all to do with the stability of the unit of account.
Hedonic estimates could be interesting if you were able to use them to track competitive changes in the market for used and new cars: you could see, for example, how the price of gas interacts with demand for acceleration and vehicle size and carrying capacity. You might want to analyze the mix of factors that drove demand for SUVs, including status considerations and defensive safety concerns. The one thing an honest economist would never do is what BLS apparently does: use manufacturer data on cost(!) to rationalize introducing an arbitrary fudge factor in to the prices attached to the shifting marketbasket.
People want the economy to reward virtue: increased productivity should be rewarded with profitability goes the thinking. Increased value should command a higher price. It does not work that way. It really doesn’t, except in mostly transitory ways. Usually higher prices and even higher income share may flow to the productivity laggards or the market cheats who find ways to extract and exploit. Industries where rapid advances are genuinely made often find their firms and workers running harder and faster just to stay even. A booming local industry may make profits for innocent bystanders, like local landlords and merchants and financiers. Falling relative prices for, say, computer harddrive space may be dramatic, but it is also a fact; claiming the computer with the additional harddrive storage capacity — that may be of only marginal use to most users, may tempt them to wasteful clutter — is some price other than what it is relative to either its predecessors or its contemporaries is just incoherent. Diamonds become water; deal with it.
Obviously what they are trying to obscure with their talk of (implicitly monetary) inflation — a changing unit of account — is a massive diversion in the distribution of income, as thr op said.
StewartM
Ian Welsh
As for cars, the bottom line is still “does it get you there?” and while service life is higher, you can no longer service it yourself in most cases (I wonder if that affects the stats? Were the people who ran them longest people who didn’t show up in stats? Don’t know.)
Just from my data point of one person, with my most recent car (bought new more than 16 years ago and counting, I come from a family that drives cars until they drop)–in my case the hedonics might work out. Just last year did I first have an issue not routine maintenance; the AC unit went out and needed $900 of repairs. That repair was done by a third-party but it probably was a repair I should not attempt myself.
The car I had before that I also bought new and held it 16 years before giving it to a friend (he drove it another 4-5); it ran trouble-free for 8 years but then had an engine gasket blow at 8 years and then an engine seal fail on the highway four years after that, the latter failure requiring an engine rebuild. After that it had problems with the carburetor flooding and stalling when driving say below 40 F (in warm weather it was fine). I replaced the carburetor ($700) but that did not fix the issue, and no one could find out why (I think it had to be a computer somewhere). I drove that another 4 years despite that before giving it to a friend.
Before then, I drove a veritable fleet of junkers (now we’re back in my college days); all with problems, the most reliable and noteworthy was a 1969 Dodge that while not trouble-free was amazingly resilient, and its claim to fame was that when the AM radio started to die it for a brief time went shortwave and I could pick up Radio Moscow! That Dodge was a great student car in that it got hit in parking lots but made of steel, the other car would come out far worse. I also used it once to tow another car on the interstate during a snowstorm to that person’s home.
But overall, it does seem that I certainly had to fix things more frequently back then, and at least some of the work I couldn’t do myself so I would say my current car is the cheapest to own.
Stirling S Newberry
>Quality improvements are nice, but they don’t replace the question of “does it let you do THE THING that it’s meant for?”
Thing that it is meant to, alive. The actual net worth of hedonic adjustments should be, but isn’t, calculated on this basis. We die less than we used to:
https://injuryfacts.nsc.org/motor-vehicle/historical-fatality-trends/deaths-and-rates/#:~:text=The%20population%20motor%2Dvehicle%20death,vehicles%2C%20a%2096%25%20improvement.
What is that (across everything and other adjustments) worth? There is very little research being done on this.
CH
Be careful here. None times out of ten those decrying government statistics about inflation and claiming that they have been deliberately manipulated by sinister elites are Libertarians/Austrians who then immediately blame “government money printing,” and claim that the only solution is to roll back government assistance and push austerity policies hard. Of course, this also means that things like universal health care or environmental programs (e.g. Green New Deal) are dead on arrival.
These people are ubiquitous claiming that if government spends anything, that “hyperinflation” is always and immediately around the corner (something they’ve been claiming for years). This is how they justify stopping government assistance in the middle of a pandemic where people are losing their jobs left and right (which is inherently deflationary). Scaremongering stories are already appearing in the media over the size of the deficit. A anti-Keynesian constriction on government spending will only hurt the average American and play into the hands of Neoliberals.
I do agree that the so-called “hedonistic adjustment” is bogus. This is typically used by conservatives to magically make declining wages disappear because the same amount of money buys bigger screens. The most important issue, as pointed out above, is that inflation is just a general rise in prices of goods and services; it does not account for spending on health care, education or housing, all of which are excluded (for legitimate reasons), and all of which have gone up much, much faster than the inflation index.
Which is to say that it feels like everyone touts and manipulates the economic statistics which confirm their preexisting political beliefs. That’s why I prefer qualitative arguments over one that just throw out statistics as “facts.”
Speaking of bogus statistics, this may be of interest: America’s true unemployment rate (Axios) Spoiler: it’s over 1 in 4.
StewartM
Sterling,
Point taken about cars being safer. However, I think Ian’s point is akin to “should you really count having Google Alexa in your vehicle as an hedonic adjustment?” I’m ok with including improvements in safety, in vehicle reliability and longevity, and in fuel economy, because from a purely economic perspective whatever you pay more for these up-front you recoup in savings later. When I have bought cars–which for me are like research projects–those are the top criteria. Vehicle color I rank as also important, there’s a reason school buses are painted yellow or bright orange and you at least want to avoid a color that blends in with the background in certain conditions.
Dubious adjustments would involve power doors/locks (especially if no manual backup if they fail) , “nice” sound systems (often really not ‘nice’ but overbassed crap), vehicle internet, internal TV/video, and other things. Some metrics, while important to an individual user are variable and should not be included (vehicle size and carrying capacity, towing ability, etc). Two things that *should* be included in hedonic measurements which have been increasingly dropped by manufacturers over the years are:
1) Having real spare tire, and the capacity to carry one;
2) Bumpers that are rated to resist 5 mph collisions.
The latter are not tested anymore because, in our neoliberal and deregulatory wisdom, we now allow supersized trucks and SUVs on the road whose bumpers are at the grill level of smaller vehicles. The bumpers of all vehicles should be at the same level, so that any low-speed front-to-front or front-to-rear accident would be a bumper-to-bumper collision, and with proper bumpers both vehicle owners are spared expensive damage.
Ben
It’s painful to watch people who know next to nothing about computers blather at length about how they haven’t meaningfully improved.
Ian Welsh
It’s painful to watch people who know computers confuse how they use a computer to how ordinary people use computers. But, typical for most developers and power users, which is the problem.
Ben
I would encourage you to actually spend some time with a reasonably modern machine. Running a web browser with 50 tabs open or streaming 4k video, which are things ordinary people do, is a nightmare on ten year old hardware. It’s far more than just power users who are benefiting from technological advancement. SSDs especially have made even mundane tasks like writing documents noticeably faster.
Also most ordinary people play video games at this point (another subject you know nothing about yet feel comfortable talking about like an expert. In reality optimization is more of a priority now than ever before, as the last console generation essentially ran on abysmally underpowered mobile processors). It’s a bigger industry than film.
Ian Welsh
My goodness, you do get exercise from leaping to conclusions. I am a pretty hardcore gamer and have been since 80s. I noted that graphics have improved and that gaming was one of the areas where tech had made things better, though frankly, games aren’t noticeably better than 10 years ago, since graphics are secondary.
My current desktop is 11 years old and I currently have 67 tabs open. This is nice, but it is also a minor convenience except when doing certain types of research.
I am not an expert in computers, but I certainly know more than nothing, and I am a user, and have been using computers since the Apple 2+ (which is when I started programming, as well.) What “experts” don’t know is regular experience.
You are working very hard to miss the point, which is that being able to browse, email, watch media, and use productivity software is what most people use computers for. You could do all of those things 10 years ago.
What is important is whether you HAVE a computer or not, not whether or not it allows some more tabs open or has better graphics for games. This is the same as what is most important about an auto: whether you have one or not.
You’re also going out of your way to be obnoxious, and I’d appreciate it if you were to go to someone else’s comment section and be obnoxious there.
Synoptocon
I’m afraid I don’t find the examples that compelling. Quality matters and prices should be adjusted – particularly in those domains. If the vehicle is getting you from point A to point B for twice as long at the same operating price, then quality really does need to be adjusted if the aim is a pure price comparison. Similarly, I don’t find the additional quality adjustment for computer hardware terribly objectionable given the very significant decline in nominal prices – particularly given that computer hardware is such a trivial component of the basket of goods. (I’m way more concerned about the impact on the calculation of capital formation than on CPI.)
Overall, I’m far more worried about whether the market basket is constructed in a way that captures the entirety of the consumer economy – given how much activity is concentrated in higher deciles – and whether the product offerings chosen to base CPI on are truly representative. Quality adjustment and hedonics receive far more attention than they should – the central question should really be how to generate a useful CPI measure in conditions of increasing inequality, exacerbated by a K-shaped recovery. Given response rates and coverage, even a little sample bias will greatly exceed the impact of quite egregious quality adjustment procedures.
different clue
@Ben
I am one of those individual end-users who knows next to nothing about computers. I am an old analog refugee in this new digital world.
I know next to nothing about computers. And I am PROUD of that fact. And I plan to conTINue to know as nearly NEXT to NOTHing about computers for as long as I live. If that makes you mad, then that makes me happy.
The main reason I have never owned a computer is inertia. The second reason I have never owned a computer is because I resent the way computers are designed to obsolesce as fast as possible, and programs even faster. I do not look forward to the day when I feel compelled to step into the hamster wheel of constant upgrades and updates and other money-extortioning rackets and hustles that the whole computer and programming industry is based on.
If you computer people decide to invent a computer which is carved out of cast iron by the dwarves in the Black Forest, and is designed to last for decades, with programming to match, then I will be HAPPY to buy it. Till then, if I have to buy the buy-it-and-junk-it self-destructo machine-programming packages which you leave me no other choice but to either buy or boycott, then I will buy it grudgingly and with hatred in my heart.
Hopefully I can put off that unhappy day for years by using computers here at the workplace or in libraries if they ever open up ever again.
Here is what David Lynch had to say about watching movies on Iphones/ smartphones/etc.
https://video.search.yahoo.com/search/video?fr=sfp&p=you+tube+david+lynch+movies+on+phones#id=1&vid=bfb3470e441600e3e883fe644cdf9eac&action=click
different clue
I found a comment at NaCap which shows exactly the kind of thing I mean in my comment above about the Computer Rackets.
Charlie
October 19, 2020 at 8:07 pm
One computer at a time. Left the world of Microsoft and Dell with purchase of Linux system. No going back. Dell killed an old monitor I had connected to the old Windows 10 system I replaced. Said they didn’t support that model, so, even though it works, I can’t use it on that computer. They do stuff to mess up your printer also. Gotta buy that new cartridge when you could probably go months, if not years, with the old one.
someofparts
I was looking for a new apartment the last couple of months. I thought rents would go down because I’m seeing demand get slammed by the covid economy. Instead rents have gone the other way hard. I’m guessing a lot of small holders are already gone and I’m seeing big private money take over. Thing is, rents didn’t just go up, they have gone up 50% in a fiscal quarter. So I wonder if medium-sized cities are about to be turned into mini-San Franciscos where there is no housing affordable for working people who are not expensively educated.