I am happy anytime GMU professors argue with each other, so I liked this recent post from Bryan Caplan:
An argument I’ve repeatedly had with Tyler Cowen:
Tyler: We’re stagnating!
Bryan: No we’re not. You’re ignoring massive CPI bias. We live in an age ofconsumption-biased technological change. Official numbers don’t adequately adjust for quality improvements, and utterly ignore the mountains of free stuff we keep receiving.
Tyler: How massive?
Bryan: Oh… Say 1 percentage-point per year.
Tyler: You’re crazy.
I’m hoping EconLog readers can help us resolve our impasse. How? By keeping atime diary for a day or two. For every waking hour of the day, ask yourself:
1. Was my experience during the last hour noticeably better as a result of an innovation introduced from 1990-present? [Yes/No]
2. Was my experience during the last hour noticeably better as a result of an innovation introduced from 1950-1989? [Yes/No]
Ideally you’ll record your judgments as you go, but chronologically reviewing your day hour-by-hour is a reasonable substitute.
Once you’re done, code “yes”=1 and “no”=0. Then calculate your average scores, and report them on quicksurveys.
My predictions, assuming I get at least 100 responses:
1. The median response for question #1 will be at least .15.
2. The median response for question #2 will be no more than three times as high as the median response for question #1.
Feel free to share your general thoughts in the comments, but please post your results exclusively on the survey page.
P.S. To broaden the sample, please blog, Like, Tweet, etc.
I have a few problems with this:
(1) As people in Bryan’s comments pointed out, he’s certainly not getting a representative sample, by asking people to blog, Like, Tweet, etc. If Bryan were having an argument with a supporter of Che, it would hardly be fair to settle it by asking EconLog readers what they thought of the guy.
(2) Yet there’s another bias in his approach, that nobody (thus far) has mentioned in the comments. Bryan is asking people to think about innovations that have improved someone’s life. It seems Bryan thinks he’s giving the stagnation hypothesis an equal shake by allowing for a “no” answer, but that’s not the only mechanism here. One could agree that there have been innovations since 1950, 1990, etc. that made my life better from 10am – 11am today, while also agreeing that there have been changes since 2008 that have made my life worse. Yet Bryan’s approach doesn’t capture the negative changes; he doesn’t even ask about them. So of course the median replies are going to be positive, and perhaps significantly so.
This isn’t merely hypothetical. When people keep telling me that the CPI numbers show there’s no inflation problem, I think they are taking those BLS numbers way too seriously. Now I haven’t been stressing this point, because it would look like I was making excuses for why my own warnings about price inflation have missed the mark, and I don’t want to be “that guy.”
But seriously: I am not just trying to fit in with the whiners when I say that going to the grocery store, I am stunned at how much they hit me up for at the register when all I did was get enough stuff for the next 3 days. So I think part of what has happened is that packaging is a similar price as before, but less volume of product. You would think that surely the BLS number-crunchers would catch all this and adjust, but that’s only if you think people in government agencies don’t respond to incentives to fudge things a certain way that their bosses want. I’m not even saying they consciously lie, rather I’m saying there’s all sorts of knobs you can turn on the “hedonic adjustments” etc. to make the answer come out a certain way.
Another example: There is a Chinese restaurant that I used to go to a lot, but then I stopped because their waiters were terrible. But then I broke down and went back to them again, after at least a 6-month hiatus. I am not exaggerating, the amount of food they brought in the General Tso’s chicken was at most 75% of the previous serving, and it could have been as low as 60%. Yet they charged roughly the same price, as far as I can remember. I would be stunned if the BLS catches stuff like that.
Or how about this: We have already talked about (in a point originally noticed by Silas Barta) that the cardboard for cereal boxes is thinner than it used to be. And the paper towels and toilet paper are awful. I doubt the BLS catches that change in quality.
Or how about this: I think one way grocery stores have adapted, is a shift to more self-service checkouts and fewer employees at any given time. (Presumably the minimum wage increase has something to do with this too.) So it’s not merely that it’s more expensive to get your week’s groceries (such that you may end up going twice a week rather than once), but now you scan and bag your own stuff. And heaven forbid if you are in the store at an odd hour and want to find something; there’s no employee in the same ZIP code. No way in the world the BLS is counting that kind of thing.