The best sentence I read yesterday

Hmm. is this new good bias the same as the issue that people are buying better TV’s for the same price today as their previous TV cost 10 years ago? Or is that considered a separate bias?

I really like Brad’s argument, but IMHO it is a little overstated. He’s right about computers — internet access is still less than 50% of the population (I had to look that up, and I was quite surprised). But cell phones are owned by 75% of 30-45 yr olds and 60% of 60-69 year olds, so improvements in cell phone pricing and technology are affecting people in the middle of the income distribution. (numbers from Robert Samuelson, http://www.msnbc.msn.com/id/5707878/site/newsweek/ ).

The policy conclusion I draw from this argument is that Congress needs to stop the mandatory conversion to digital TV.

What I find interesting is that in 1999 Gorden said the BLS had adapted much of the Boskin Commission recommendations and significantly reduced the overstating of the CPI. But here he is back using the same guessestimate of a 1.1% bias. So which was right, Gorden in 1999 or Gorden now?

Also note that in calculating the real income data census does not use the cpi-u. Rather it uses the cpi-rs, a series that goes back and applies the new changes in the cpi to show what it would have been if the new medhods had been used all along. The cpi-rs shows inflaion of roughly 0.5% annually less then the cpi-u.

gvtucker,

You seem to be confusing seat belts (which were imposed by law from the government)
with advances in television technology (the government never outlawed regular TV).

The last time I checked at Best Buy or Target, however, I could still find and old stlye TV for that is 20 inches for around $100-120 bucks, easily affordable by the lower
middle class. This was not the case 20 years ago.

Similarly, I strongly disagree with the claim that lower income people
in this country are not better off in absolute terms than they were previously.

Take the point of AIDS. Touche. That is obviously a problem. But in the aggregate porrer people are more healthy now than many upper middle class were in the 1970s (in the sense that they live longer).

Putting aside the CPI bias for a second, its plain common sense that most americans are better off now than they were 30 years go.

Mr. Knight,

Sorry it is late so this will be brief

1) Source on life expectancy: http://www.policyreview.org/138/eberstadt.html Particularly this passage:

“Perhaps not surprisingly, adults without a high school diploma had significantly higher age-standardized death rates than the general population: In 2002, the differential was over 50 percent among both men and women. Despite the relative magnitude of this disparity, however, in absolute terms death rates in 2002 for this educationally disadvantaged group were lower than they had been among the general public some years earlier. The overall age-standardized death rate for women 25 to 64 years of age in 1970, for example, was slightly higher than the 2002 rate for their counterparts who had not completed high school. Among adult men, death rates for the general public in 1970 were about 10 percent higher than among high-school dropouts in 2002.

For babies and infants, the single most important measure of health status is surely the infant mortality rate. Between 1970 and 2002, the infant mortality rate in the United States fell by nearly two-thirds, from 20 per 1,000 live births to 7 per thousand. The infant mortality rate continued its almost uninterrupted annual declines after 1973, when officially measured poverty rates for U.S. children began to rise. The contradistinction is particularly striking for white babies. Between 1974 and 2001, their infant mortality rates fell by three-fifths, from 14.8 per 1,000 to 5.8 per 1,000; yet over those same years, the official poverty rate for white children rose from 11.2 percent to 13.4 percent. (See Figure 4.) ”

2) Do you really believe that the larger sodas in vending machines reflect demand more than camoflaged inflation?

Not sure what your getting at here. Last time I checked, I could buy soda in a number of different ways: in cans at the
store, in big bottles (usually 2 for 1 if you look correctly), at a soda machine, on tap. I was not alive back when soda
was first popular but all the people I talk to say that the choice was much more limited than it was before.

3) Whatever Jason Furman thinks about my other views, I agree with him on this:

“The rising cost of health and college is a central part of the middle-class misery narrative. And no doubt it’s a major strain. But in comparing living standards we should be focused on quantities not prices. And the quantity increases in health and college are enormous – and much more important to me than the quantity increases in gadgets. And health is not just about lower mortality and morbidity, but also about, among other huge improvements, fewer nights in the hospital, more outpatient procedures, and less invasive procedures. The CPI for medical care is so incapable of capturing these developments that it’s completely useless.”

4) I also agree with Jason on this: its actually kind of irrelevant to whether income inequality should be declining. But lets not
try and make it like the broad middle/lower middle class is not better off than they were, they are and they know it.

Thanks

Matt