In a NYT article [2]which perhaps was meant to boost poor Americans' spirits that despite their horrible economic plight (because, you see, the past five years of Fed monetary easing - which explicitly allowed US politicians to avoid engaging in much needed and very unpopular fiscal reform - only focused on helping just the wealthiest - sorry very much, better luck next time) things really are quite great because, through the magic of hedonics, most things are really cheaper than ever.
To wit:
Since the 1980s, for instance, the real price of a midrange color television has plummeted about tenfold, and televisions today are crisper, bigger, lighter and often Internet-connected. Similarly, the effective price of clothing, bicycles, small appliances, processed foods — virtually anything produced in a factory — has followed a downward trajectory. The result is that Americans can buy much more stuff at bargain prices.
They can.
The only problem is they don't, because while one can use hedonic adjustments all day long to make it appear that one gets more bang for the buck, one still has to spend several hundred to over a thousand for a simple television set every few years, regardless of whether it is 1080p, 4K, 3D, or any other fleeting fad.
The NYT does touch on this amusing sleight of hand used by economists always and everywhere to make inflation appear tamer than it is:
“If you handpick services and goods where there has been dramatic technological progress, then the fact that poor people can consume these items in 2014 and even rich people couldn’t consume them in 1954 is hardly a meaningful distinction,” said Gary Burtless, an economist at the Brookings Institution. “That’s not telling you who is rich and who is poor, not in the way that Adam Smith and most everyone else since him thinks about poverty.”
Indeed - because between soaring food and energy prices, and stagnant or outright declining wages (the average weekly wage this month was $24.31 [3]; the average weekly wage last month was... $24.31), and the indigestability of the iPad (a new version of which is offered every 8-12 months with new features, which somehow also makes it hedonically cheaper) America's poor couldn't care less about how "cheap" those things they simply can never afford, allegedly are.
And the other problem, and an indication of just how ridiculous hedonics really is, is shown on the chart below, which is what economists use to "justify" that inflation really is very tame.
The punchline: apparently the "hedonically adjusted" deflation in Television costs over the past ten years is over 100%.
[4]
Huh, deflation of more than 100%? How is that possible? Just read the fine print:
Data is collected from retail stores and adjusted by specialists to reflect changes in quantity offered in a product or an increase in quality. Much of the drop in prices for electronics reflects an increase in quality over the past 10 years.
Ah, so the drop in prices in not actually a drop in prices which very well may be rising... but simply "an increase in quality."
By that logic, 99% of Americans are wealthier because the US household net worth chart showing really just the wealth of 1% of Americans (those whose paper wealth is tied to the stock market) moves from lower left to upper right. Courtesy of Mr. Chairmanwoman's money printer. And if not that then, well, there is always the trickle down effect.
Isn't modern "hedonically-adjusted" economics just grand: after all, since the quality of that money in your pocket is so much higher, you are now richer. Just ignore the fact that in proportion to all the outstanding money, what you have in your pocket is now worse than a joke.