Ramblings

by Joseph Weisenthal




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
    Ben Robinson, 20 Mar 2006 @ 12:50pm

    Inflation is not simply an increase in the money supply, it is an increase in the money supply that is not matched by an increase in production. I.E. There is more money around but the same anount of goods and services to spend it on, there fore the prices of those goods and services increases to match the amount of money there is to spend on them. If the money supply is increased by an amount equal to an increase in production then inflation does not occur. This is obviously an over simplification but it's basically how it works.

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