CD Player Dropped From Inflation Data, Phonograph Next?

from the neverending-treadmill dept

In the UK, the Office of National Statistics has decided to remove the personal CD player from the basket of goods which make up the RPI, the equivalent of our CPI, a measure of inflation. Nobody buys them anymore, the thinking goes, so the more popular and expensive mp3 player has replaced it. In the US, the Bureau of Labor Statistics, often make similar decisions. But does this make sense? Measures of inflation, when placed against wage measures, are supposed to indicate whether consumers are getting ahead. If prices go up, while wages stagnate, then that's a sign of trouble. Now, the reason that consumers buy mp3 players, and not CD players, is that they're better quality and a better deal. Or, put another way, consumers could still buy a high-quality CD player, and save a lot of cash for later. Either way they benefit. But, inflation data doesn't reflect this, it only notes that mp3 players are more expensive and thus the basket of consumer goods doesn't seem to go down in price. It seems that intellectual property isn't the only area in which the government has failed to adapt to new technology. Economic measurements need to show that consumers benefit from the rapid obsolescence and constant price deflation that marks the high-tech world.

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  1. identicon
    Kiwi Fireball, 20 Mar 2006 @ 9:18am

    Inflation

    Infaltion can happen because of any number of situations.

    For instance, Scarcity is one. If a rancher has to destroy 50% of his cattle due to mad cow disease, then it probably won't effec tthe ecnomy too much... but if every rancher in the US has to destroy 50% of their cattle due to the disease, then a scarcity occurs. Supply and demnd... yada yada.

    Another instance, Government fees and taxes. If the government raises or implements fees on all businesses of a certain type those businesses will have to charge more for their end product to make up the difference.

    Still another, Regulations. If a series of companies is only allowed (by the govt) to harvest so many trees for instance, this creates a scarcity of goods. In order to pay for the cost of operating, those costs are passed on to the price of the end product. In this case it's likely the companies could produce more but they are not allowed to.

    It's all pretty simple really. Any number of good articles can be found on the internet. Perhaps you should google something like "why does inflation happen?"

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