Re: Real wages constant since 1964?!

2003-12-06 Thread Fred Foldvary
 If you measure wages in desk calculators instead of dollars, I'm sure
 they've gone up substantially!  ;-)
 --Robert

And if you measure wages in units of a real-estate price index, they have
gone down substantially!
Fred Foldvary

=
[EMAIL PROTECTED]


Re: Real wages constant since 1964?!

2003-12-06 Thread Fred Foldvary
--- john hull [EMAIL PROTECTED] wrote:
 Why are we better off today?
 (Better products  two wage households would be a
 start, I guess.)

Better products, yes, but not necessarily two-wage households.

If the price of housing goes up substantially, a spouse may be induced to
work for wages, but after paying for the increased cost of real estate,
extra taxes, and child care, the family may not be better off.

When the wife goes to work for money wages, it looks like the GDP has gone
up, but she is substituting commercial child care for her home child care
that does not show up in GDP, so the per-capita increase in GDP is
exagerated.

Fred Foldvary

=
[EMAIL PROTECTED]


Re: Real wages constant since 1964?!

2003-12-04 Thread Bryan Caplan
Really?  Every undergraduate class I can remember listed the failure to
adjust for quality as one of the main problems with the CPI.  And I
don't think they just said it was inadequate.
William Dickens wrote:

This is completely wrong. The CPI-u is, and the CPI-x was, adjusted
for

quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X
doesn't exist anymore.
So what price statistic wasn't adjusted for quality changes?


They all are. No one (who knew what he was talking about) has ever
claimed that they are not adjusted. The common claim is that the
adjustments (which are quite complex and differ across different types
of goods) are inadequate. - - Bill
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
--
Prof. Bryan Caplan
   Department of Economics  George Mason University
http://www.bcaplan.com  [EMAIL PROTECTED]
Infancy conforms to nobody: all conform to it, so that
 one babe commonly makes four or five out of the adults
 who prattle and play to it.
 --Ralph Waldo Emerson, Self-Reliance


Re: Real wages constant since 1964?!

2003-12-04 Thread William Dickens
Not my class! I remember laboring for a while under the misimpression that hedonic 
methods were used for autos (they aren't), but when you took Econ 1 from me I 
certainly never said the CPI wasn't adjusted for quality.

And yes, you can go the BLS web links that I had in my original post and read the 
technical documentation. This is, and has been for a long time, a major issue that 
people spend a lot of time thinking about.

I think you are remembering your undergraduate education incorrectly (it has been a 
while Bryan). Some goods don't get any quality adjustment. It is possible that that is 
what you are remembering. There are cases where there are quality changes and no 
adjustment, but every index is, and always has been (as far as I know), adjusted to 
some extent to allow for quality changes. - - Bill

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

 Bryan Caplan [EMAIL PROTECTED] 12/04/03 02:43PM 
Really?  Every undergraduate class I can remember listed the failure to
adjust for quality as one of the main problems with the CPI.  And I
don't think they just said it was inadequate.

William Dickens wrote:

This is completely wrong. The CPI-u is, and the CPI-x was, adjusted

 for

quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X
doesn't exist anymore.

So what price statistic wasn't adjusted for quality changes?


 They all are. No one (who knew what he was talking about) has ever
 claimed that they are not adjusted. The common claim is that the
 adjustments (which are quite complex and differ across different types
 of goods) are inadequate. - - Bill

 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


--
 Prof. Bryan Caplan
Department of Economics  George Mason University
 http://www.bcaplan.com  [EMAIL PROTECTED]

 Infancy conforms to nobody: all conform to it, so that
  one babe commonly makes four or five out of the adults
  who prattle and play to it.

  --Ralph Waldo Emerson, Self-Reliance


Re: Real wages constant since 1964?!

2003-12-04 Thread John Perich
As the listmember who probably has the dampest ink on his econ B.A., I can verify that that's what's being taught in our universities.

-JP[EMAIL PROTECTED] wrote:
In a message dated 12/4/03 3:07:31 PM, [EMAIL PROTECTED] writes:I think you are remembering your undergraduate education incorrectly (ithas been a while Bryan). Some goods don't get any quality adjustment. Itis possible that that is what you are remembering. There are cases wherethere are quality changes and no adjustment, but every index is, and alwayshas been (as far as I know), adjusted to some extent to allow for qualitychanges. - - BillNope. I learned the same thing, albeit some years earlier, in myundergraduate education, that the CPI-u doesn't adjust for changes in quality or in themarket basket.Davi
Do you Yahoo!?
Free Pop-Up Blocker - Get it now

Re: Real wages constant since 1964?!

2003-12-03 Thread William Dickens
David Levenstam wrote:
Yes, the BLS series uses CPI-u to deflate the nominal wage series.
Since
CPI-u doesn't account for changes in the quality of goods or the
market basket,
and overstates inflation more the higher the actual rate of inflation,
for the
inflationary period from roughly 1968-1983 the BLS series understates
real
wages. Using a better deflator, CPI-x, which accounts for changes in
the market
basket (though perhaps not for changes in quality) discloses that real
wages
have indeed risen quite a bit since 1964.

This is completely wrong. The CPI-u is, and the CPI-x was, adjusted for
quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X
doesn't exist anymore. It has been replaced by CPI-U-rs (
http://www.bls.gov/cpi/cpirsdc.htm ) which takes all the
methodological improvements introduced in the CPI  in the last few years
and computes what the CPI would have been if those changes had been in
place all along (the published CPI-u for any given date reflects
whatever methodology was in place at the time of the initial release).
The most important change in explaining the difference between the
CPI-u-rs and the CPI-u is the treatment of housing during the late 70s
and early 80s when rents were much lower than the imputed cost of new
housing based on current mortgage rates.

There is a very big question as to whether the CPIs current methods for
dealing with quality change are adequate. On the one hand there are lots
of ways that they probably fail to pick up quality improvements (service
industry output is notoriously difficult to measure so quality
improvements are very hard to discern). On the other hand, there are
clear cases where methods over state quality change. For example, every
time a new product is introduced that replaces an old one the entire
increase in price is attributed to improved quality rather than treated
as a price increase. Since the introduction of a new product is also an
opportunity to change the price, one suspects that at least some
inflation will get factored into such changes, but will be ignored.
Also, a lot of people wonder whether the hedonic methods used to compute
the increases in quality of computers isn't overstating those gains
(which are a very big part of productivity gains over the last decade).
The value of an increase in memory or speed is judged by what those who
buy it are willing to pay for it when both old and new machines are
being sold, but we know that those who run out and buy the fastest new
machine when it comes out probably value speed etc. a lot more than
those who don't buy. When the price goes down enough so that everybody
buys what used to be the fastest machine the CPI quality adjustment
assumes that even the last people to get the fast machine value it as
much as the marginal person when the machine was relatively new.

Most economists who study these issues think that the CPI (even the new
research series) still understates quality change on average though most
also think that the understatement is quite modest (less than the Boskin
commission's estimates of 2%). However, Janet Norwood (who was BLS
commissioner during the last Republican administration) has argued to me
that the CPI probably over estimates quality change for the reasons I
mentioned above. Her guess was that the overestimate was about 1% or
less per year.

Obviously 1% error either way for 30+ years is going to make a huge
difference in what we think has happened to real wages. Given the
methodological uncertainty I doubt we could ever know for sure. - - 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


Re: Real wages constant since 1964?!

2003-12-03 Thread William Dickens
 This is completely wrong. The CPI-u is, and the CPI-x was, adjusted
for
 quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X
 doesn't exist anymore.

So what price statistic wasn't adjusted for quality changes?

They all are. No one (who knew what he was talking about) has ever
claimed that they are not adjusted. The common claim is that the
adjustments (which are quite complex and differ across different types
of goods) are inadequate. - - Bill

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


Re: Real wages constant since 1964?!

2003-12-03 Thread AdmrlLocke
In a message dated 12/3/03 1:53:31 PM, [EMAIL PROTECTED] writes:

 This is completely wrong. The CPI-u is, and the CPI-x was, adjusted
for
 quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X
 doesn't exist anymore.

So what price statistic wasn't adjusted for quality changes?

They all are. No one (who knew what he was talking about) has ever
claimed that they are not adjusted. The common claim is that the
adjustments (which are quite complex and differ across different types
of goods) are inadequate. - - Bill

In fairness I was just summarizing the arguments of Professor Richard B.
MacKenzie at U of Cal Irvine, published back in 1994.  If his arguments have been
superseded, I stand corrected.  There's not need for ad hominem attacks,
generally a sign that the target has challenged one of the attacker's shibboleths.
;-)


Re: Real wages constant since 1964?!

2003-12-02 Thread Robert A. Book
 I'm sorry to bother you with this.  I just looked up
 the time series for total private average hourly
 earnings, seasonally adjusted, in 1982 dollars on the
 BLS web site.  It comes back that they've been
 more-or-less constant since 1964.

 I'm floored.  Is this right, or am I doing something
 wrong.  I thought that real wages were generally
 higher today than in the past, ups  downs
 notwithstanding.  Why are we better off today?

 (Better products  two wage households would be a
 start, I guess.)



If you measure wages in desk calculators instead of dollars, I'm sure
they've gone up substantially!  ;-)


--Robert


Re: Real wages constant since 1964?!

2003-12-02 Thread AdmrlLocke
In a message dated 12/2/03 11:48:08 AM, [EMAIL PROTECTED] writes:

If you measure wages in desk calculators instead of dollars, I'm sure
they've gone up substantially!  ;-)


--Robert


Yes, the BLS series uses CPI-u to deflate the nominal wage series. Since
CPI-u doesn't account for changes in the quality of goods or the market basket,
and overstates inflation more the higher the actual rate of inflation, for the
inflationary period from roughly 1968-1983 the BLS series understates real
wages.  Using a better deflator, CPI-x, which accounts for changes in the market
basket (though perhaps not for changes in quality) discloses that real wages
have indeed risen quite a bit since 1964.

If we measure the rise in real wages in terms of desktop computers, would the
increase by asymptotic to infinity?  ;-)

David Levenstam