Jim Devine wrote:
>I detect irony in the word "wondrous," indicating that you don't
>approve of the changes. As Dave Richardson pointed out, however,
>the lower inflation rates that came out of the CPI revision is not
>all bad. If St. Alan sees a smaller dragon, he's less likely to
>lance the economy to death.
I care less about what the index does for St Alan's worldview than
its accuracy. The only revisions that the Boskin commission or the
BLS considered were ones that lowered the CPI. And the use of hedonic
price measures on computers and other gadgets is pretty close to
mystical. The change, which ripples through the national income
accounts, has the effect of boosting growth rates, especially
estimates of real investment, to almost implausible levels.
James Medoff & Andrew Harless have an interesting critique of the
effects of the hedonic technique in the May 26 issue of Grant's
Interest Rate Observer.
Doug
