Posted On: Saturday - May 25th 2019 5:37PM MST
In Topics: Music Economics US Feral Government Inflation
(pretty much continued from here and, earlier, here.)
The 2nd major component of the part-inadvertent/part-intentional correcting of the official "basket of goods and services" used as an attempt at reaching apples-to-apples comparisons of costs in a changing economy is the simple concept with the fancy name - "Hedonics". The Greek root of this is the same as that for "hedonism" (oooh-la-la! Are we going to learn about the economics of orgies today?!) [Negatory! This is a family site.- Ed] The root is has the meaning of "pleasure". The point of hedonics is to make calculations that correct our purchases based on an equal amount of pleasure derived from them.
Which cabin service gives the customer more pleasure?
The pleasure could be literal, like with that juicy steak vs. that obtained from a can of Spam. It could be just economic pleasure, as it, you were able to travel farther on a gallon of gas in this new car versus the old model. Hedonics is a method of correcting the value of the items in that CPI basket after attempting to measure pleasure obtained from newer versions of the same good or service.
Let's go back to that old IBM (or what were called IBM-clone) computer seen in the previous post versus what would be in the basket now, a $300 Samsung tablet, perhaps. In this case, first of all, prices really are way down, in nominal dollars. In addition, the BLS would reckon, you are getting much more pleasure out of that tablet. (Sure, but that's because porn just wasn't the same on that old 640 x 480 pixel screen.) Seriously, you can do a lot with the tablet. I would agree it has more value, and there would be no one item or even combination thereof, 30 years ago, to compare it to. Computer/electronic technology, or Artificial Stupidity, as we like to call it at Peak Stupidity, is a pretty special case of items that legitimately lower the inflation rate.
The BLS has this page with more interesting links on it, that list the categories of items for which they do "quality adjustments", or hedonics. They even get hard into the math, using formulae to assign weighting to the different qualities of these items. There are even base-10 log functions in there and Greek letters! Cool!
The Mises Libertarians have their criticisms of the whole process. I'd like to point out some problems. I don't see autos on the list, but appliances are there, and I'd like to use automobiles, as also pieces of machinery, to illustrate one problem. There are features on newer products that WE DON'T HAVE A CHOICE ON. Let's say, the BMW has that feature in which the windshield wipers turn on automatically. If we paid for that, OK, then that should add to the pleasure obtained and the car price should be adjusted for that, before apples-to-apples calculations. However, most of us don't mind turning a knob when we see rain coming down. Are features like extra usb-ports, "green-mode" shifting, rear wipers, extra trim, that we don't have a choice in buying, part of the adjustments. This goes for appliances just the same.
Then there are the intangibles, such as the airline service depicted above. Air travel has gone WAY DOWN in real dollars over the last 3 decades (i.e. almost steady in nominal dollars), a subject for another post. Part of the way that was done, however, was to eliminate much of the personalized service. Now, sexy flight attendants are one thing - I don't think they cost any more - it's a PC thing, maybe never to come back ;-{. Having only one agent board a flight with no time for questions, or doing every step of reserving/checking-in on-line, may give equal or MORE pleasure to a younger customer, say of Generation Z, who really doesn't want to talk to anyone besides his barista to begin with. For some of us, it IS a loss of the pleasure or utility of this service. This type of thing can't be measured easily though.
Just as some services, are other items for which there really isn't anything that they can substitute FOR, in the basket, such as internet service. We didn't need it back then, and we didn't pay anything. Now, we almost need it to live (I don't even mean this sarcastically as a disparagement of Facebook and Twitter, but there are things your employer or school may only expect, or allow, you to do on-line), and, well, you're gonna pay 50 bucks or more if you don't bundle it. I imagine, the CPI basket must get some new items in it, just as some are deleted, to keep up with the times. This is neither substitution nor hedonics (even though the BLS site lists it as such). It can be fudged too, keep in mind, but I have no examples at the ready.
When I mentioned in a previous post that substitution and hedonics were two forms of correction of the CPI that could be abused, likely under pressure, by the green-eyeshade boys (AND gals) at the BLS, I left out another factor that could be a third from. That is, the Inflation by Deflation phenomena explicated by Peak Stupidity. We've probably mentioned it in some of the other posts with the Inflation topic key in addition. Does the BLS really measure food prices by the fluid or weight ounce? I would hope, but how about thickness of lumber that is still called 1 x 2? I seriously doubt that.
In summary, though I would trust them on a gasoline price graph, or other commodity, no, I don't think you can trust the general inflation numbers out of the US Gov't Bureau of Labor Statistics, along with a lot of other important numbers. That's why, for us noticers, there's Shadow-Stats.
No matter how you measure it, the real effect of inflation is to diminish the quality and size of the products we are used to paying a certain amount of money for, and, for the same price, to turn what used to give us pleasure into a new miserable experience. Since that's the name of an album by a band that Peak Stupidity has woefully neglected to feature, here are The Gin Blossoms, out of Tempe, Arizona. From that excellent 1992 album New Miserable Experience, this is Allison Road, not a hit, but to me the best song on it.
What a simple, bright guitar sound there!
Ahhh! Speaking of electronic hedonics, wouldn't it have been easier to make that video today, with flat screen TVs?! I'm glad the guy didn't try to lift up that big console model at the end (probably should have just shown a scantily-dressed girl instead of the TVs anyway - this is rock music, right?)
Bill Leen – bass guitar
Jesse Valenzuela – rhythm and lead guitar, backing and lead vocals
Robin Wilson – lead vocals, acoustic guitar, percussion, harmonica
Scott "Scotty" Johnson – lead and rhythm guitar, backing vocals
Phillip "Phil" Rhodes – drums, percussion, backing vocals
(There were 3 Scotts in the band over the different years, 2 of them "Scotties" and 2 of them on drums.)
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