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Which prices are falling?
Some of them. Buy this stuff! Overall it looks like a net subsidy to toy-loving, camera-loving nerds and a tax on commuting parents with large families.
Hat tip goes to Patrick Appel.
Posted by Tyler Cowen on July 25, 2008 at 08:03 AM in Data Source | Permalink
Comments
This is awesome.
Posted by: Amber at Jul 25, 2008 8:33:02 AM
a tax on commuting parents with large families.
Only because he only looks at new cars. Full-size used SUVs are down about 25 percent.
Posted by: Ted Craig at Jul 25, 2008 9:18:53 AM
Wages only outpaced the CPI by 5%? Wow. Now if only we could get the staples to go down by as much, we'd have more to spend on the items in the chart.
Posted by: Mo at Jul 25, 2008 9:46:33 AM
Does it tell us something that almost everything on the list is stuff you buy with 'discretionary income' and not staples?
Could that mean that discretionary income has been decreasing over the past 10 years due to the increase of price of staples and 'manditory' items such as fuel, health care and food?
Posted by: Gary at Jul 25, 2008 10:09:24 AM
So basically the conclusion is that globalism has provided enough relatively low-priced distractions to the reality that we've sold ourselves down the river.
I preferred the 80s/90s when I could afford a home, food, and gas and buying a new computer or camera was something I did every 2-3 years.
Posted by: meter at Jul 25, 2008 10:40:50 AM
>I preferred the 80s/90s when I could afford a home, food, and gas and buying a new computer or camera was something I did every 2-3 years.
Weren't the computers pretty expensive in 80s so as to buy every 2-3 years...? can someone throw a number here?
Posted by: Brad at Jul 25, 2008 11:32:32 AM
Much, but not all, of the decrease in nominal computer pricing has been in the form of performance increases. In 1986, while a junior in college, I bought an IBM clone (8086 chip, for you older nerds) with a 20 mb hard drive, 640k of RAM and a 5.25" 256k floppy, a high resolution amber monochrome monitor and a Star dot matrix printer with a "near letter quality" mode. That cost me $1100. I added a 2400 baud modem in the early 90s and wrote a dissertation on it complete with lots of math notation. It booted up just as fast as my modern computer and ran programs just as fast too. There were almost no graphics available, and with no internet, there was almost no networking. (Usenet and gopher). My grad school stipend around that time was $10k per year for comparison.
Posted by: liberalarts at Jul 25, 2008 12:04:04 PM
Computers down 90%? I don't think so. I bought a mac in 87 and then again in 94 and 98 and 2005 and 2008;
prices (roughly)
2700 SE
2900 cx
3000 powerbook
1500 macbook
1800 airbook
One thing i would agree with is that many of things that used to be major expenses are not any more. Things that were major parts of my budget in previous decades are not a big factor anymore. In my personal case, housing so overshadows everything else that I hardly even think about what used to be major budget concerns.
Of course I live in the middle of DC :-)
Posted by: RobbL at Jul 25, 2008 12:55:12 PM
According to the CPI from 1997 to 2007 the average price of a new car fell 5.5%.
But over the same period the average transaction price rose from $19,531 to $23,338. This 19.5% increase is what the average new car or light truck buyer had to actually pay.
But the BLS is saying that the average quality of new cars rose 24% (19.5 + 5.5).
This really gets to be an interesting exercise in the entire issue of how you treat quality adjustments in calculating inflation and real standards of living.
Posted by: spencer at Jul 25, 2008 3:37:44 PM
Is there any principled way to calculate a percentage increase in quality?? Do they just look at a car now and compare it to cars in the past and if an "equal" car in the past cost 25% more, that's a 25% increase in quality?
Posted by: Cliff at Jul 25, 2008 6:51:00 PM
Gary, it's because the "discretionary" items are not very regulated by the government, whereas the government feels the need to regulate the availability and price of staples like food, fuel, etc.
Posted by: LZ at Jul 25, 2008 7:59:41 PM
Right, cause the auto industry isn't regulated.
Posted by: meter at Jul 25, 2008 9:20:38 PM
I think it's hard to make the distinction in reality between price changes of staples versus discretionary items. Heck, I think it's even hard to track the price of a single item. What amazes me when I'm in the grocery store is the huge differential in price even on single items.
The generic can of green beans is essentially the same thing as the name brands. I think you'd frequently have a hard time telling them apart in a blind taste test. Yet, the name brands are frequently more than double the price. So, what is the inflation rate of green beans? The stated rate might be high, but I can go to the store & buy some pretty cheap green beans. In the same store there must be a half dozen ways to buy cola. (In a case, in a can at the checkout, at the fountain, from a vending machine at the front door, etc.) Depending on the delivery method I choose, the price can range from around 10 cents/oz. to 90 cents/oz. This is the same product, in the same store. I think the inflation rate is basically untrackable on a lot of these items where price sensitivity has become so low.
Posted by: kebko at Jul 26, 2008 1:29:53 AM
Falling prices for individual items are good, but I don't buy that it has any bearing on inflation.
Firstly, these falling prices are a technological process and inflation is a monetary phenomenon. Secondly, how much do people actually spend on computers. Sure, the first mainframes were expensive, but nobody had them. Now, a computer is a competitive necessity. Plasma TVs have come down recently, but they didn't exist 10 years ago. I had a hard time finding an entertainment center for my CRT TV. People have spent a fortune upgrading. The CPI is up 33% and wages up 38%. That means that in 10 years, assuming you buy the same amount of CPI items (which of course you don't), you've only gotten ahead by 5%. That's basically like a 0.5% raise per year, not including stuff like taxes.
Posted by: Andrew at Jul 26, 2008 5:12:40 AM
"Firstly, these falling prices are a technological process and inflation is a monetary phenomenon."
If you're measuring inflation through price levels, how do you distinguish between technological & monetary phenomena? It seems to me that the thousands of influences on the price of even one product would be impossible to catalog.
Posted by: kebko at Jul 26, 2008 4:12:44 PM
Really, cheaper TVs. I dont see that. Of course new TVs are larger and clearer (with added cost of HD channels) but what if you are looking for a small cheap set. No choice left.
Posted by: luke at Jul 29, 2008 12:17:00 PM
