Economics has met the enemy, and it is economics

[C0ckney]

We already know that CPI is wrong just from the simple thought experiment: if you could choose between earning the median 1970 income but only being able to spend it on the stuff available in the 1970s (at 1970 prices), versus earning the median 2010 income and getting to spend it on 2010 goods at 2010 prices, I'm pretty sure you would choose the latter. But CPI says you should be indifferent between those options.

i don't disagree with your conclusion. i was merely pointing out that you have to be careful when you look at 'improvements' in various goods. also what would be interesting would be to see the prices of things which aren't 'goods', like food, energy, housing etc.

for me personally, it would, computer aside, make very little difference, but then i’m not the average consumer.

[DaShi]

Why? According to Kuci's argument, if a $200 computer in 2010 was sold 1970, you should be paying only $10 for the same computer (using the same arbitrary rate of inflation from my previous example).

[Kuciwalker]

No, I'm saying that point 2 of Kuci's argument is wrong in concept. The price of, say, a banana could be $1 in 1970 and then $20 dollars in 2010. However, median wage in 1970 could be $1, but only $10 in 2010. You can argue all you want about new products, but it is irrelevant to a CPI argument.

Erm, no, step 2 is just this:

1970 median household income: 8,689
1970 CPI: 37.8
1970 real median household income: 8,689 / 37.8 = 229.867725

2010 median household income: 49,309
2010 CPI: 216.687
2010 real median household income: 49,309 / 216.687 = 227.558644

i.e. real median household income in 2010 is essentially the same as in 1970. Except, as I said, we know that's not true.

sources:

http://www.census.gov/hhes/www/income/data/historical/household/index.html

http://inflationdata.com/inflation/consumer_price_index/historicalcpi.aspx

[Kuciwalker]

(I cheated and actually used "mean of the third quintile" in place of median, since I only saw median data back to 1975.)

[DaShi]

Erm, no, step 2 is just this:

1970 median household income: 8,689
1970 CPI: 37.8
1970 real median household income: 8,689 / 37.8 = 229.867725

2010 median household income: 49,309
2010 CPI: 216.687
2010 real median household income: 49,309 / 216.687 = 227.558644

i.e. real median household income in 2010 is essentially the same as in 1970. Except, as I said, we know that's not true.

sources:

http://www.census.gov/hhes/www/income/data/historical/household/index.html

http://inflationdata.com/inflation/c...oricalcpi.aspx

Hmm. If this correct, shouldn't it be true for every year? So 1980, 1990, and 2000 real median household income should all be ~228, yes?

[giblets]

Why?

[Kuciwalker]

Hmm. If this correct, shouldn't it be true for every year? So 1980, 1990, and 2000 real median household income should all be ~228, yes?

No, not if the median household income rises faster than the price of the basket of goods included in the CPI...

[Kidlicious]

Economists aren't very good at knowing well being. The average person will tell you that things were better in the 60s or even the 70s, but economists insist on fighting against what is true. Maybe it's because a lot of them are rich.

If people don't have money in the bank. easy access to jobs, home ownership, and things like that new products don't make them happy. The really sad things about computers is that they haven't made life better.

[KrazyHorse]

So you keep pretending that your insight about this is superior, and you keep refusing to share it. (Though you did last time I asked, which is an improvement). And this despite the fact that I've always been more than willing to acknowledge superior evidence when you present it.

Why don't you answer the question I asked?

1) I have hundreds (thousands?) of substantive posts on economics on this site, you dumb ****
2) I have no idea what question you're referring to, you dumb ****
3) even if I did, it is overwhelmingly likely to be either a question based on some kind of elementary misunderstanding of what economics is, how it proceeds in practice, or its conclusions, or some uninteresting question, or a question I've discussed previously multiple times. You dumb ****.

[KrazyHorse]

No, I'm saying that point 2 of Kuci's argument is wrong in concept. The price of, say, a banana could be $1 in 1970 and then $20 dollars in 2010. However, median wage in 1970 could be $1, but only $10 in 2010. You can argue all you want about new products, but it is irrelevant to a CPI argument.

You have no idea what cpi is supposed to measure. Before arguing with somebody, you should make at least a minimal effort to understand the ideas you're talking about.

[Main_Brain]

It's mentioned in the article as a growing field.

(RE: Behavioural Economics.) But its not, the MRIs are hugged by the Marketing Guys and the Behavioural Theory went to Games Theory which again assumes rational, completly informed Players in a Situation where all Options and Outcomes are known. :/

[MikeH]

1) I have hundreds (thousands?) of posts in economics threads where I call people '***** on this site, you dumb ****

Fixed

[Asher]

Fixed

What's hilarious is it's very believable KH said what you "fixed" it to.

[KrazyHorse]

Fixed

I don't see how those two things are mutually exclusive.

[MikeH]

Yeah, I'm sure you might have made a couple of posts that were genuinely economics related, and not just calling people *****, I must just have missed them.