I was smashed in a debate by the most liberal guy i know.

[Anti Federalist]

the BLS uses something called hedonics, from the root word hedonism. Essentially, the adjust the price of an item based on the "pleasure" or increased value you get. Thus, they don't price automobiles based on the sticker price, but on what you get for your money. If the manufacturers load in more items like new electronics or anti-locking brakes that were not standard the year before that means you are getting more value for your dollar, so therefore the price in terms of inflation goes down even though you may be paying the same or even more to get out of the car show room.

I've often wondered how you could calculate the small minority of "refuseniks" like myself who would reply, "I don't want all that computer shit in my car, you are not 'adding worth' for me, what you are doing is making me pay for a bunch of shit I don't want."

 

[Bryan]

Industrialization should make prices cheaper because things are made faster with less cost.

Not always- see my prior post.

 

[StilesBC]

Tell him to read "The Rational Optimist" by Matt Ridley. Read it yourself and you will win that argument.

Contrary to the popular belief, people are spending WAY less on food, shelter, clothing than they were 1000, 500, 100, 50 and even 20 years ago. These things are all getting cheaper relative to average incomes. So that shouldn't be the argument. What should be argued is the legitimacy of savers being punished relative to asset owners as a matter of explicit government and central bank policy. What gives them the right to make that decision?

Part of the problem is that throughout the course of industrialization, the definition of "poverty" has changed enormously. Before, even a king didn't have the luxury of sanitary disposal of their discharge, medicine for the common cold, or access to reliable sources of information. Today, the lack of sanitation, medicine and the internet is the very definition of poverty. Even 20 years ago, the internet was a luxury for only the super rich.

Seriously, read the book from above. It will shed light on how absurd the socialist nostalgia for pre-industrialization really is.

 

[nathanmn]

More productivity does not necessary mean more of everything- some items can be naturally limited, and when they are there can not be more production. As industrialization picks up there will be more demand for their limited items, and with no increased supply, the price will go up.

Yeah, that too. Population sure has gone up with industrialization, and I bet a chart with population and cost of living would show the same thing.

 

[Bryan]

I've often wondered how you could calculate the small minority of "refuseniks" like myself who would reply, "I don't want all that computer shit in my car, you are not 'adding worth' for me, what you are doing is making me pay for a bunch of shit I don't want."

But you know, no one is making you buy anything... of course in the case of cars, this situation is a bit more complicated since you are competing with others to be able to earn money, which is necessary to pay your property taxes. To remain competitive, and minimize the net effect of the taxes you need to be efficient in what you do, and that means being able to get to and from work as cost effectively as possible.... and that means buy a car and use gas (oil). So in effect, taxes create a built in demand for cheap travel and government regulations that lead to increases in this cost just compound everything... A bit off-topic, but just some food for thought trying to express what could be non-apparent interrelations.

 

[Anti Federalist]

But you know, no one is making you buy anything... of course in the case of cars, this situation is a bit more complicated since you are competing with others to be able to earn money, which is necessary to pay your property taxes. To remain competitive, and minimize the net effect of the taxes you need to be efficient in what you do, and that means being able to get to and from work as cost effectively as possible.... and that means buy a car and use gas (oil). So in effect, taxes create a built in demand for cheap travel and government regulations that lead to increases in this cost just compound everything... A bit off-topic, but just some food for thought trying to express what could be non-apparent interrelations.

True enough, and in the case of cars, many of the "luxuries" that have increased the cost over the years are there because government demanded they be put there.

My point was more to address the failure of the market, which in many ways is democratic and not republican in that it serves the wants of the majority only, and in many cases ignores the wants of the minority, in this case, people like me that don't want to have to "upgrade" their cel phone every six months, do not want a car filled with a bunch of spy on you, shut you down computer crap or have to learn a new OS every year because of "upgrades" and don't want or need refrigerators that tell the "grid" how much milk you've got, or fully computerized washing machines. I'll turn a simple timer dial, thanks, it works just fine.

There are some forms of technology, like knobs on car radios, that mankind got right the first time and should be left alone, and an awful lot of what is being passed off as "new" is not really technology that is "changing the game", like the invention of the IC chip for instance, but rather just superfluous geegaws being hung on existing platforms, that, to my mind, don't add much value at all.

 

[Che]

how bout population?

 

[hugolp]

how bout population?

What about population?

 

[Che]

does increase in population create more inflation?

 

[Zippyjuan]

does increase in population create more inflation?

If you have that larger population chasing the same amout of goods you had before, yes, you should see prices inflate. If the amount of goods increases at the same rate or faster than the population grows then you should not expect to see prices increasing- assuming everything else stays the same. Population is just one component of the equation.

If you want to see if wealth is improving or not, one measurement I like to use (some disagree with this which is fine) is to use as a unit time instead of money. How long did you have to work to buy something? If you can work fewer hours today than you had to work in the past, then you are better off. Say 100 years ago, one third of your paychecks went to food. Today, ten percent of your paycheck goes to food. In terms of food, you are much better off today. Working fewer hours means it costs you less time (effort) to aquire the good. This helps include changes in incomes along with changes in prices. If an apple used to cost $1 but now cost $2 does it really cost you twice as much? If your income also doubled, it takes the same amount of work to get an apple. You are trading the same amount of labor for the apple. If you had to work 1000 hours to buy a car and now you work 750 hours, then cars are cheaper (random numbers for illustrative purposes only).

This is why I cringe when somebody tries to say that a dollar has lost 94% of its value. It only tells half of the story. Sure things cost more than they did in 1900 but people are not paid the same money they were paid in 1900 either. If you have lost 90% of your purchasing power, you have to work ten times longer to buy the same things you used to. Incomes have been inflating as well as prices have- though not always at the same rate.

 

[hugolp]

If you have that larger population chasing the same amout of goods you had before, yes, you should see prices inflate. If the amount of goods increases at the same rate or faster than the population grows then you should not expect to see prices increasing- assuming everything else stays the same. Population is just one component of the equation.

Not necesarely. It all depends how the increase of population affects the subjective valuations of the goods (including money).

 

[Mark37snj]

Demand makes prices rise along with inflation. Look at the date at which it really took off, the 60's. The vast majority of households then were couples/families. There were very few singles owning homes or renting apartments. But the 60's told women to burn their bras, storm to corporate workplace, and strike out on their own. That drastically increased the demand for all products while at the same time suppressing labor wages because of the increase in the workforce. Oversimplified but very relavent.

 

[Bryan]

There are some forms of technology, like knobs on car radios, that mankind got right the first time and should be left alone, and an awful lot of what is being passed off as "new" is not really technology that is "changing the game", like the invention of the IC chip for instance, but rather just superfluous geegaws being hung on existing platforms, that, to my mind, don't add much value at all.

I understand-- but sometimes, for better or worse, that is the market at work. My beef is generally low quality-- I rarely want to buy low quality items since they don't last, but there is a huge market for it- so you have to work hard, and pay an extra premium for quality.

 

[Bryan]

This is why I cringe when somebody tries to say that a dollar has lost 94% of its value. It only tells half of the story. Sure things cost more than they did in 1900 but people are not paid the same money they were paid in 1900 either. If you have lost 90% of your purchasing power, you have to work ten times longer to buy the same things you used to. Incomes have been inflating as well as prices have- though not always at the same rate.

That is true, the situation is different however with savings. Say, for example, that every Jan 1 all prices are to double and everyones pay is to double, there would be no change in purchasing power for earnings, but your savings would be cut in half each year-- thus if you wanted to save you'd have to work to find ways to best preserve your stored wealth.

Of course there is no perfect monetary unit that could guarantee to preserve wealth but a free market of currencies will work to the desires of the market.

 

[LiveFree79]

As far as I know industrialization should make prices come down.

Industrialization means more productivity.. more productivity means more of everything.. and more of everything means lower prices.

More money floating around results in lower worth of the money so prices go up.

Industrialization in a capitalistic market destroys the middle class eventually dividing the people into the rich and the poor. This is basic economics buddy. Capitalism concentrates wealth into the hands of the few and when it runs its course it means the rich control vast sectors of the economy at the behest of government.

 

[Krugerrand]

That is true, the situation is different however with savings. Say, for example, that every Jan 1 all prices are to double and everyones pay is to double, there would be no change in purchasing power for earnings, but your savings would be cut in half each year-- thus if you wanted to save you'd have to work to find ways to best preserve your stored wealth.

Of course there is no perfect monetary unit that could guarantee to preserve wealth but a free market of currencies will work to the desires of the market.

Just to add to this point, Bryan.... Many savings options will naturally inflate with the currency - such as stocks. However, when we pay taxes - we pay capital gains taxes on inflation. So, people will lose some percentage of that inflated value when they sell their investments.

 

[Fox McCloud]

as you can clearly see, as the amount of ice cream consumed goes up, there are more people drowning...therefore, ice cream causes more drownings--we should urge Congress to ban ice-cream to cut the amount of drownings in the nation.


Obviously I'm being snide and sarcastic here.

What the above indicates is that correlation does not establish causation. The cost of living has been falling for a very long time now---which means that the market is actually outcompeting the government and inflation---very impressive (though this seems to be changing as we may be entering a period of stagflation).

Take a look at these charts; they'll smash the "standard of living is declining" argument.

I'd be willing to bet that your friend's graph has a decent correlation to increases in wages+goods+services, though.

here they are:

Fairly interesting stuff.

 

[tmg19103]

Someone else picked up on the same thing on a local blog I read. Glad to see the word is getting out. This guy lives in a extremely liberal area and always out-argues the liberals on that blog. Click on his screen name to see all his posts. Good stuff.

http://www.saveardmorecoalition.org...estors-still-it-outside-milkboy#comment-20247

 

[Bryan]

Just to add to this point, Bryan.... Many savings options will naturally inflate with the currency - such as stocks. However, when we pay taxes - we pay capital gains taxes on inflation. So, people will lose some percentage of that inflated value when they sell their investments.

Excellent point. The kicker for me however is that if you have a centrally controllable momentary unit, like we do with the Fed, then those who do the controlling can enrich their cronies with pre-knowledge of what they plan to do years down the road, thus optimizing and enhancing the storage of their wealth. For everyone else you need to waste countless hours a year trying to predict what isn't so easy to predict just to keep your wealth preserved. Certainly one reason why PM's are desired as an alternative to fiat dollars.

 

[Bryan]

LOL. Great post all around.