Re: Landsburg Column
Hi Alex, We agree. If I'm right that the changes in the price of quality are profound then the five year measures should show big changes. Particularly between 1945 and 1970 I would bet they would be enormous. -- Bill >>> [EMAIL PROTECTED] 11/27/00 12:03PM >>> Bill, As I read Landsburg the Klenow-Bils idea is that if at time 1 the rich own 100% more microwaves than the poor at a 25% higher price then at time 2 when the poor own 100% more microwaves than at time 1 the quality-adjusted price (unobserved) has fallen 25%. What they need to assume is that the quantity/quality price that poor and rich consumers face at time 1 continues to hold between time 1 and 2. My guess is that the assumption requires some sort of uniform technological improvement across the span of microwaves from low to high quality. (Probably also some homotheticity type assumptions about preferences). The examples you mention show that technological improvement is not uniform across quality types but does the tradeoff change so fast that the cross-sectional results are uniformative? Suppose, for example, that you reestimate the cross sectional quantity/quality price every five years - this is easy as there is plenty of data - then all you need is more or less uniform technological improvement over any five year span, which seems reasonable enough to me. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Landsburg Column
Bill, As I read Landsburg the Klenow-Bils idea is that if at time 1 the rich own 100% more microwaves than the poor at a 25% higher price then at time 2 when the poor own 100% more microwaves than at time 1 the quality-adjusted price (unobserved) has fallen 25%. What they need to assume is that the quantity/quality price that poor and rich consumers face at time 1 continues to hold between time 1 and 2. My guess is that the assumption requires some sort of uniform technological improvement across the span of microwaves from low to high quality. (Probably also some homotheticity type assumptions about preferences). The examples you mention show that technological improvement is not uniform across quality types but does the tradeoff change so fast that the cross-sectional results are uniformative? Suppose, for example, that you reestimate the cross sectional quantity/quality price every five years - this is easy as there is plenty of data - then all you need is more or less uniform technological improvement over any five year span, which seems reasonable enough to me. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Landsburg Column
At 10:47 AM 11/27/2000 -0500, you wrote: >RE: http://slate.msn.com/economics/00-02-09/economics.asp >... I haven't read the original study Given that, Landsburg's account >of the idea seems totally nutz to me. Why would we assume that the >relative price of quality vs quantity should remain the same over time >(that has to be the underlying assumption that makes sense of the analysis >that is being done). ... That assumption didn't bother me as much as positional goods concerns and other ways that rich and poor differences at the same time differ from differences across time. The study assumes that if the value that rich people get from spending more on something is the same value that poor people will get when they spend more on such things as a nation gets richer. However, rich people save more than poor people, but savings don't seem to rise as we all get richer together. Rich people spend a smaller fraction of their income on health care, but nations spend a larger fraction as they get richer. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Landsburg Column
RE: http://slate.msn.com/economics/00-02-09/economics.asp I read the Landsburg column, but I haven't read the original study he is commenting on. Given that, Landsburg's account of the idea seems totally nutz to me. Why would we assume that the relative price of quality vs quantity should remain the same over time (that has to be the underlying assumption that makes sense of the analysis that is being done). Doesn't it seem obvious that the manufacturing revolution of the early to mid 20th century reduced the relative cost of quantity (look at how the use of craft work in buildings dropped in favor of simple machine honed moldings for example and how mass produced plastic ticky-tacky replaced crafted pottery and dishes) while the information revolution seems to be reversing that trend and decreasing the relative cost of quality (by making more customization possible)? If I'm right that would mean that the method that Landsburg wants to use would grossly overstate productivity growth for the first 70 years of the 20th century (where ! the price of quality is underestimated and the trend is ignored). Its hard to say whether its under estimated or over estimated since then. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
