by BabyPeanut » Fri 21 Oct 2005, 12:32:21
$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('FoxV', '"')Inflation is high because of the cost of food and energy, but if you don't need to use it then its not a problem".
They should make a measure of inflation that took only into account essential items. Of course, that wouldn't look good in statistics. But it would give you a good idea of reality.
You are suffering from a lack of understanding of hedonics.
$this->bbcode_second_pass_quote('', '[')url=http://www.bls.gov/cpi/cpiaudio.htm]
Using Hedonic Methods for Quality Adjustment in the CPI: The Consumer Audio Products Component (link)[/url]
Mary Kokoski, Keith Waehrer, and Patricia Rozaklis
Division of Price and Index Number Research U.S. Bureau of Labor Statistics 2 Massachusetts Avenue, NE Washington, DC 20212
This paper is a draft and a revised version will be published in the future.
Abstract There has been a strong recommendation that the BLS explore the use of hedonic regression methods for quality adjustment in the Consumer Price Index (CPI). Until recently data limitations have made this goal difficult to implement for many categories of goods and services. This paper reports the preliminary results of employing data purchased by BLS from an outside source to produce hedonic regression-based quality-adjusted price indices for consumer audio electronics products. The effects of hedonic-based quality adjustment are examined. Hedonic indices are derived directly from the regression coefficients, and compared to the adjusted CPI values. Issues of regression specification, and practical problems for CPI quality adjustment are also addressed.
...blather...
A price index, such as the CPI, intends to measure the effects of price changes while holding other economic factors, such as the physical attributes of the goods available, constant. In the real world, however, goods and services are always changing in their physical characteristics. This makes it necessary to find some method of subtracting out the value of quality change when the market basket and prices change. Traditionally, the BLS has used several methods of quality adjustment. These include overlap pricing, direct quality adjustment using information from producers, and linking methods. Basically, all of these methods rely upon the subjective assessment of BLS personnel (commodity analysts) in selecting newly appeared products that most closely match the disappearing ones. Hedonic methods have been recently introduced into the BLS toolkit for housing (to correct for age bias) and apparel commodities.
Research is underway which considers the use of hedonic methods for quality adjustment for personal computers, televisions, VCRs, and even college textbooks, using or expanding the CPI sample to estimate the hedonic regressions. In the CPI, the sample size for a category of good or service is a function of the relative importance of that category in the average consumer household’s total annual average expenditures. For many types of goods and services where hedonic methods are likely to be useful, the sample of CPI data is too small for such an empirical application. Possible solutions to this problem are to collect additional observations on these goods for this purpose or to use supplementary data sources to provide hedonic coefficient estimates that may be used for quality adjustment when substitutions occur in the CPI sample.
Rich, computery goodness! You just can't measure that with an old-skool CPI.
