Hedonics, in economics, is essentially the idea that if something is better than it used to be, it is effectively cheaper, so inflation is less than it seems.
In comments, BDBlue posted this:
In Queens, New York, on Friday, William Dudley was bombarded with questions about food inflation, and his attempt to put rising commodity prices into a broader economic context only made things worse.
“When was the last time, sir, that you went grocery shopping?” one audience member asked.
Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. . . . “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said referring to Apple Inc.’s latest handheld tablet computer hitting stores on Friday. “You have to look at the prices of all things,” he said.
This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment “tone deaf.”
“I can’t eat an iPad,” another quipped.
And that bit about an Ipad2 being twice as powerful, as if that means it has twice as much utility, is why hedonics are complete bullshit. I have a computer today that is so much faster than the computer I had 10 years ago that that computer is a snail in comparison. What do I do with it? Write, go on the internet, play games, use spreadsheets, basically. At none of those things is it all that much better than my computer in 2001. The graphics in my games are a lot better, but they aren’t better games because of it (Deus Ex is better than anything I’ve played this year, and it was published in the late 90s.) My word processing software is not enough better that I notice, the spreadsheet is essentially identical, the browser is certainly better, but not that much better. This computer just does not have that much more utility than my old one.
Adding computers to physical processes gives you about a 50% gain max. Adding computer to most service or clerical activities gives you almost nothing in terms of productivity, it just lets management have more control and more detailed reports (supply chain management is the big exception). The gains are NOTHING compared to what attached an internal combustion engine did, which gives you about 10X gain compared to manual labor, or even what steam power did for those things it could be used for. Computers today may process 100s of times faster than those of even a few years ago, but they are neither hundreds of times more productive, nor do they improve happiness (utility) by hundreds of times.
Hedonics are largely bullshit. They are a way to reduce what inflation is measured as, so that all the things which are indexed to inflation (like many pensions) cost less.
And yes, you can’t eat an iPad, so food inflation matters more.
Cloud
Hilarious. But frightful too; somehow obliviousness in elites seems worse than mere dishonesty. Probably because the former makes catastrophes more likely.
W.r.t. computers, it’s for some time been clear that the “robots take over” idea is false; rather it’s a gradual and (nominally) voluntary assimilation into the cyborg Collective — helped along by peer and employer pressure. I’ve heard employees report that they literally would lose their job if they closed their facebook account, because using it for marketing purposes is expected of them. The line between public and private life disappears, with private on the losing end.
Celsius 233
When the hell are the fucking morons who “rule” us going to come back to reality?
As a human I require food, shelter, and a place to shit. Further, I need a means to continue these necessities. Everything else is tinsel; pretty but useless.
Can we get back to basics and realize the American dream is and always has been bullshit. These morons are so far from where we need to be they might as well be from Dantes Inferno, which they stoke every damn day.
What the hell are humans thinking. Ugh, rhetorical question; they aren’t.
David H.
When the hell are the fucking morons who “rule” us going to come back to reality?
I think you’ve got that exactly backwards. When are the people getting stomped on by reality going to bite back? Not that I’m blaming them, because if you’re working so much just to feed yourself & your family, you hardly have time to do anything else. But we’ll be waiting a long, long time before the morons come back to reality.
Ian Welsh
The people ruling us aren’t precisely morons, they are rather sociopaths. What they’ve been doing has worked to make them rich and powerful, and if everyone else is getting fucked, well, so what? Nothing will change till America’s elites are made to suffer pain with the rest of the population.
Celsius 233
David H.
I think you’ve got that exactly backwards. When are the people getting stomped on by reality going to bite back?
==============================
Okay, I can go along with that.
==============================
David H
Not that I’m blaming them, because if you’re working so much just to feed yourself & your family, you hardly have time to do anything else.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Isn’t that a bit like swimming against a strong current? At some point; if one isn’t making headway, doesn’t one have to re-evaluate the chosen action?
Either way; it’s up to the people and nobody else.
There is no savior; there is only us.
Celsius 233
Ian Welsh PERMALINK*
April 17, 2011
The people ruling us aren’t precisely morons, they are rather sociopaths. What they’ve been doing has worked to make them rich and powerful, and if everyone else is getting fucked, well, so what? Nothing will change till America’s elites are made to suffer pain with the rest of the population.
========================
Hyperbole aside; you are correct. I just get so damn frustrated sometimes. Cheers.
Z
As far as hedonics are concerned, our rulers are hardly morons for using them; they work to their advantage becoz they understate the rate of inflation so it decreases the amount their government has to pay out to cost of living adjustments for folks on social security and disability. They invented this hedonic bullshit for this exact purpose: to decrease the amount their government pays out to its subjects (in that, I mean all of us outside the ruling class).
Our rulers are hardly morons in most regards. Greedy? Short-sighted? Sociopathic? Most definitely. But stupid? No way, unless you think they’ve been rolling 7s for that last 30 to 40 years just by luck coz damn near everything they’ve done during that period has ended up benefiting them.
Z
Ian Welsh
Hyperbole? I use the word sociopath with due consideration. It is what leaders in politics, business and so on are selected for in this society, the ability to sleep at night after destroying large numbers of lives to enrich a very few people.
Celsius 233
Sorry Ian; I was referring to my hyperbole. I saw none from you; sociopath is a very good description of these wankers.
Celsius 233
Yes, moron was a poor choice of words; however, when one looks at the results of “their” actions/hedonics over the long run, a case could be made they are morons.
Pollution and global climate change affect the whole planet; even their part of it.
If they think, and all evidence would indicate they do, that they can buy their way out of their foul dealings and bad results; they’ll meet their Waterloo and ours.
Z
Celsius: “Pollution and global climate change affect the whole planet; even their part of it.
If they think, and all evidence would indicate they do, that they can buy their way out of their foul dealings and bad results; they’ll meet their Waterloo and ours.”
That’s part of the reason why they are trying to cull our ranks. They call it austerity.
Z
Celsius 233
Z
Solient Green comes to mind; a way to cull the old, insane, physically deformed and control the number of serfs.
guest
I think the reason computers have not made us that much more productive is that all the excess capacity they generate gets sucked up into things you never needed before. In one job I had, maybe I could have worked 10 times as many cases with a computer as they did before computerization. Except now I have to perform many more tasks on a case as you used to, and then I have to provide all sorts of weekly and monthly reports to my supervisors that they did not have before. Somehow they used to get that information before, but now they think they are getting it in real time. On the other hand, they want their reports on Monday, which means the secretaries have to input our time on Friday, which means we have input our time on Thursday. So we are just guestimating/fudging what we are doing for 20 to 40% of our time anyway. Why they think that information is so fricking valuable that it can’t wait another 2 days, I’ll never understand.
tBoy
Sociopaths? Rather narcissists. The leaders anyway. Please look it up in Wikipedia and tell me I’m wrong.
We’d be better randomly selecting our Federal leaders from the population at large because then we’d get the average number of narcissists as opposed to nearly 100%. An average sampling of Americans would make for a much better system than what we currently suffer under.
On to the subject at hand. You think the argument of increased computer speed is ridiculous now let’s take it to one of its logical ends – computerized medical records. What a joke. So when the incorrect diagnosis is tagged to your ID you now have that following you around like a bad habit. Try to get each healthcare person you see from now ’till the end to understand that somebody made a mistake way back then. We have a garbage system now – making it easier to disseminate errors and omissions. Talk about propagating unaccountability.
This is not some mindless rant. I know of what I speak. My wife & I have been writing Part A (Institutional) medical billing software since 1995.
PurpleGirl
tBoy: You think the argument of increased computer speed is ridiculous…
For the average home computer user the increased speed of a computer at a reduced cost is not quite ridiculous but it does not bear on the problem on inflation in the everyday day increases they do face. I don’t buy a new computer every day, every week, every month or even every year. What I use one for at home does not require the absolutely most-up-to-date machine, not even new software.
But I do buy food every day/week. I have to watch my budget, especially since I’ve been unemployed for over two years. And food prices do affect well being. And it isn’t just prices — manufacturers are reverting to old games again. The price doesn’t change but the amount in the package is less. I do have rent to pay and increases in that will definitely hurt me. Fortunately the housing development where I live has its own power plant so I do not have a separate bill for electric/gas utilities. But that can affect my monthly charges, just to a lesser extent than to other people who do pay separated. These the prices I must watch. What my computer could cost… not so much. (And yes, my tower unit recently stopped working and I need a new one but without a job, it doesn’t matter what they cost, I can’t buy because I have NO discretionary money.)
BDBlue
Hedonics is even more useless if you consider non-electronic material goods. Each generation of electronics can at least be said to do more*, most household goods are, in fact, much worse than they were 20 or 30 years ago. I bought a washer and dryer, a decent set, and it was breaking down after 6 years. A friend has a Maytag set built in Iowa in the 1980s that still runs like a charm, it even had more features than my newer set. Similarly, my mother passed on to me an electric hand mixer from the early 1960s. Not a high-end one, just a standard one that my working class parents could afford when they first got married. That thing still works great. One built today will not still be working in forty years.
The difference between now and 40-50 years ago is that they used to build things to last and pay their workers enough to be able to afford to buy them. Now, they build shit overseas, pay people here $10 an hour to sell it, the $10 an hour people can only afford to buy the cheap shit and even then they need credit (at 20-30%) and, of course, in five years, just as they’ve maybe paid it off, they have to replace it.
* Although often you have to replace electronics because like everything else, they suffer from planned obsolescence and you often are forced to upgrade to something new – even when your prior model still works – because the maker stops supporting the software/firmware for the older machines.
Notorious P.A.T.
“I think the reason computers have not made us that much more productive is that all the excess capacity they generate gets sucked up into things you never needed before.”
That’s for sure. When a computer doubles in speed, businesses react by doubling the amount of irritating pop-ups you must navigate to see what web pages you want, most content providers react by increasing the amount of pointless bells and whistles that clog up your load time, and game makers react by pouring effort into snazzier graphics and cut-scenes that don’t necessarily translate to a game that’s more fun. At least that’s what I’ve seen. Our society rarely takes advantage of gains in a truly productive way. It’s like the guy who buys a car that’s twice as fuel-efficient as his old one, so he figures he can drive twice as many miles whether he needs to or not.
quixote
Well, just to play devil’s advocate here…. The thinking behind excluding “volatile food and energy costs” from inflation for monetary policy purposes is that those costs jerk around. If you jerked interest rates around to match every few months, the markets would have multiple birds, and that would be more damaging to everyone’s finances than basing policy on “core” inflation.
So far, so good.
Conveniently excluding those costs when dealing with payments where food and energy are major components, such as pensions, is an obvious ploy to underpay.
And conveniently ignoring the upward trend in food and energy just because the oscillations around the trend line are bigger is another kind of expensive dishonesty.
What I’m trying to say is that, yeah, inflation definitions are mostly a crock, but it is important to remember any grains of truth that might be in there.
Same with the hedonics. As a yearly inflation adjustment it’s an obvious elite-serving fudge factor. But over multiple decades, as a historical tool perhaps, it’s not so silly.
For instance, is the ability to carry music with you everywhere and listen to it any time a worthless factor? People spend multiple billions of dollars on that. Going from the living room radio set to the crackly transistor held to the ear to the earbuds with perfect sound is worth something.
There’s no way to pin down the small, unquantifiable differences from year to year — and pretending you can is dishonest — but the balance of effort and pleasure in life can change with technology and it’s not stupid to try to measure that in an academic sense.
madamab
These politicians are protected from the concerns of the “little people” like us, because they are able to pay enough money to avoid said concerns. If gas goes up to $10/gallon, what do they care? They can afford it. They also don’t see the real costs of those increases because someone else is buying their food, filling up their gas tanks and doing other daily tasks for them. Health care? They’re covered. Why don’t the rest of us pay for it like they do?
At some level, they recognize that their lack of concern for the governed is, indeed, sociopathic. That is why so many of them embrace the Ayn Rand/Milton Friedman construct that rich people are rich because they deserve to be. God gifts “exceptional” people with exceptional earthly rewards as a signal to the rest of the drones that these are the people to be obeyed. (Comfortingly glossed over in their belief system is the fact that most of them stole from poor and/or working class people in order to gain their massive fortunes.) This pathetic claptrap, which wouldn’t fool a child of ten, must be what allows them to sleep at night.
Cujo359
Most of that CPU power is used for two things:
1. Making more sophisticated graphics run faster. Often, that’s just to make the desktop graphics more appealing – probably the biggest use of 3D graphics in newer desktops is in all those new window decorations that move and wiggle or whatever. 3D graphics take a lot more horsepower than 2D.
2. Giving programmers the opportunity to be more efficient at producing software, because they don’t need to worry so much about how efficiently their software uses computer resources.
Both developments have made software better for users over the last 25 years, but if you use your computer for the same things you did a decade ago, you might not notice that. There’s certainly no reason to believe that a computer that’s twice as fast is going to be twice as good at doing what you need to do. It might be infinitely better at it, in that the added horsepower makes it possible, or it might be no better at all.
BDBlue
Re computer games, I remember reading an article (can’t find it now) that basically said that the price of gaming consoles (XBox, PS3) determine how long the companies go before introducing the next generation. Essentially, by having to cut the prices on these consoles to make the competitive during the recession meant that the makers would have to speed up the introduction of the next generation console so as to reset the price point higher again. And, of course, with that it will become harder and harder to find new games for the console you were just able to buy because the price dropped.
Bolo
But System Shock 2 was better than Deus Ex… 😛
I think some form of hedonics is necessary, but when you throw an iPad in with food you’re clearly talking insanity.
beowulf
I guess that’s one kind of hedonic treadmill. Steak is replaced by hamburger replaced by dog food replaced by dogs replaced by Soylent Green. No inflation and best of all, for some mysterious reason, the Census reports fewer and fewer Americans are living in poverty.
PurpleGirl
Listen computer guys: I use my computer to do wordprocessing. No matter how fast the computer goes, no matter how much you think you’re improving the software, it won’t matter to me because I CAN’T (and won’t be able to) TYPE FASTER. Processor speed may be nice when I’m web surfing, but not to the extent that I’m going to see it as something I have to upgrade all the time. What you geeks consider essential isn’t essential to many other endusers.
Ian Welsh
Yes, the introduction of an actual new type of product increases happiness. So, for example, the introduction of Sony Walkman’s was a big deal, and yes, the initial ipod was a significant upgrade on that. Each iPod after that? Not so much.
And I wonder about cell phones and laptops. I think, overall, they increase happiness, but the “leash” effect for employees is something I wonder about. Same thing with email and voice mail at work. My experience of voice mail and email was that it was mostly used at work to ask me about “problems” which would have solved themselves, and that if I wasn’t receiving so much of the crap, I’d actually be able to do more work and so would everyone else. These things aren’t an unalloyed good.
And every upgrade of the software actually decreased productivity, I know this for a fact because I was the one measuring it. It increased control, it increased reports to management (but decreased their accuracy, because people who are constantly monitored start constantly fucking with the monitoring), but it decreased actual throughput of work. And despite all the controls, I doubt it increased work quality, certainly the customers were less and less happy, though there are other possible culprits. But when you can do less work, customers tend to get unhappy, especially when management won’t acknowledge their wonderful system actually decreases productivity, even when it’s measured to have decreased by more than one investigator, working independently from each other.
BDBlue
Let me sing the praises of the lowly pager. I hate – hate, hate, hate – my Blackberry and I long for the days when I had a pager. Pagers were great. They were small and unobtrusive. People actually considered whether something was important enough to page you in your free time. Now, I get emails 24/7, most of which aren’t very important, but a few of which do need immediate attention. But there’s no way to weed out the ones that need immediate attention without reading them all.
I never minded having my free time encroached upon for actual crises (okay, I minded a little, but it came with my job). I do mind getting bombarded with crap around the clock, which is what now happens with my Blackberry.
* The one exception to the above is the ability to travel and not have to take a laptop to get email. I can understand people who are out of the office a lot, liking Blackberries, but for the rest of us desk jockeys, they are, in fact, an invention of Satan or at least a few of his minions.
steve della maggiora
I still have my 1 megahertz Atari with Cubase. In my experience it outperforms any newer midi sequencer I’ve tried, and I have tried several to try to replace it. It runs one two-millionths as fast as the computer I’m typing this on. Just the built-in midi interface alone seems both superior and infinitely less trouble than the multiple interface hacks needed to get reliable timing information into either this mac or my xp machine.
I have read that there was a concerted effort to get common folk to become videographers with cheap cameras (now phones) so as to make necessary the huge hard drives and super fast processors that were in development long ago…the ones in this machine right her, as a matter of fact.
As to the value of these labor saving devices overall, I will just mention that once my girlfriend used to write articles that went to a newspaper, where they were typeset, and then published. Now she is expected to be 1) a writer, 2) a designer, 3) a typesetter, and 4) an computer expert, (2, 3, and 4 are called “desktop publishing” ha ha) just to do the job she used to do 20 years ago. And now she gets paid less.
steve della maggiora
ok, that’s one two-thousandths as fast….. ; )
The Raven
The new technologies provide enhancements to the human ability to communicate, which is a real human need. They also enable flocking behaviors. These are real human needs. Satisfaction of this need obviously doesn’t substitute for satisfaction of other needs, like that for food, of course–Dudley’s remark was wrong-headed.
As to the workplace, these technologies appear to make possible a democratized workplace, but the vision is required before anyone will develop that possibility. One of the big problems is definitely the need for tech that enhances rather than interferes with concentration. Mark Weiser knew it 15 years ago when he wrote about “calm technology” and Google appears to be aware of it now, but again vision is needed to develop the possibilities.
lambert strether
We should never forget that it takes highly trained professionals to create bullshit at a world-class level.
Purple Library Guy
How ironic, when one considers that the way inflation is measured was changed a couple decades ago by the exact same sort of people as that guy talking about ipods, to do the precise opposite of hedonics, also in order to downplay inflation.
That is, food inflation is measured such that if the consumer moves to a less expensive alternative and holds costs steady, no inflation occurred. Steak got more expensive, but consumers can shift to Hamburger Helper for what steak used to cost? No inflation. I kid you not, that’s how they measure nowadays.
So, reducing quality in food doesn’t mean inflation, but increasing quality in optional doodads does mean negative inflation. It’s all a matter of what claim is convenient to keep the proles in the dark and not trying to squirm out of their mushroom-food covering.
tBoy
On the bright side they will need to come up with a new trick – the quality of food available at most US grocery stores is dismal.
Ian Welsh
Somehow negative hedonics — like bad food, don’t get in.
jawbone
Celsius233 @ 4th comment–
Re: your reply about some people working so many hours with so many responsibilities that they have little time to take actions, even, and this is my addition, read enough to learn they’re being screwed and how.
That depends on whether one’s labors are getting one to the point of being able to afford the basic necessities and also leave a bit more to use at one’s own discretion.
For this country, with the poor staying poor and many from the working and middle classes falling into penury, there are fewer and fewer of those discretionary dollars to allow choice of spending.
Now, what is basic? Is it basic to have internet access? No. Is it basic to being able to get information which the Powers That Be don’t want disseminated? Yes. Can you go to a library to read on the interet? Yes, but…. The “but” being hours of access fitting into your hours of work and responsibilities. Also, once there, most libraries limit time on computers as they don’t have all that many.
Is it basic to have telephone service? I would say yes, for various reasons. But, for some it is not within their ability to pay for.
Cable TV? No, but what if that gets you internet access at a cheaper rate?
Anyway, I think you understand what I’m getting at: At some level of income, there’s little to no real choice. Or the choice is between the gallon of milk (close to $4/gallon in my area) and the gallon of gas (about the same in my area, right now). Having a car? In parts of the suburbs the time commitment to use public transit is immense and getting place requires some kind of vehicle. Suboonia is not kind to the poor. There’s also the choice of going without, especially for health care.
What are the proper choices to make when one falls into penury? As more and more will do as jobs, for myriad reasons, are not being created? As the politicians decide austerity is the way to go in this nation. Obama, using Republican talking points more and more as part of his reelection tactics, has now announced that the priority is to cut the cost of government. Great, with, oh, real un/DISemployment about 20+%?
One of the great ironies is working so hard, there’s no time to pursue other activities, and, then, not working and not being able to afford those other activities….
Want to protest? How does someone afford to get to the protest rally? The Koch Bros. will pay for Tea Partiers…. and on the left?
There’s a reason most of the early protesters in Egypt were middle class. Many of the lower paid working classes had to wait until getting their wages before they could even think about joining the protests. Same for our student protests of the 60’s-early 70’s. Students working their way through had to pay for their rent or lose their place to sleep and eat, lose their way of purchasing food, lose their chance to pay the next year’s tuition, etc.
Grinding people into poverty is part of controlling them, and the modern corporatist oligarchs know that.
StewartM
The simple reason for that is—OS and software bloat. You’d notice if improvements in the hardware actually resulted in, say, improvements in performance that weren’t largely eaten up by programs that do the same thing as before just less efficiently (often the reason is more ‘eye candy’ is added. All OS’s suffer from this problem, though Windows suffers the most and Linux suffers the least.
In the sciences, computers can allow one to do things not doable before. Before computers, multiplexing instrumentation wasn’t feasible. I don’t know if scientific applications would be a “physical process” under your definition but it’s definitely a real gain.
With office work, I differ and I do believe there is some real gain. I regret that in my college years I lacked word processors, it would have made writing term papers with footnotes trivial to do instead of the typing nightmare it was.
I agree. The only way to compare items is in their replacement cost—so your 2001 computer should be compared to a new one today of similar “ranking”. That means the proper comparison involving computers would be to compare the low-end computers of 2001 to the low-ends of today, mid-range to mid-range, and high-end to high-end. Even if a 2001-powered computer satisfied completely your needs, you don’t have the option of buying a new one just like it. That simple fact makes it bullshit.
And by that standard, computer prices might have declined slightly, so there would be a net drop in inflation on computers, but not nearly the drop that hedonic adjustments would have you believe.
The bigger reason is “Why do we have systemic inflation even when there’s high unemployment?” I think the problem is structural. You can have full employment with low inflation when the vast majority of people are actually engaged in producing *real goods* or delivering *real services*–because there, the rise in demand is matched by a rise in supply. The transformation of US economic life into one where an increasing amount of people obtain their income by not producing anything of value, often by means which still adds to the money supply (*hello bankers! Hello Wall Street*) means you have an increase in demand without an increase in supply.
I also note that the US problem with persistent systemic inflation began in earnest in the late 60s, after the Kennedy/Johnson tax cut which lowered the upper rate from 90 % down to 70 %. I believe every time you cut the top rate you encourage people at the top to reward themselves more (they being often in charge of a “pot” of money and being the ones who get to decide where it goes). These in turn use that money to feed the speculative casinos the financial markets have become.
StewartM
Celsius 233
jawbone PERMALINK
April 19, 2011
Celsius233 @ 4th comment–
========================
All points taken; nice reply.
I have moments when my view isn’t so kind or understanding. Why?
Because at some point we are allowing the very victimization being wrought upon us. We have spent years and years buying the fable that is the U.S.
Where does personal responsibility begin or end? Having been one of the activists (like 10’s of thousands) who marched against the Viet Nam war; I come from a generation of action.
I’m afraid I hold us responsible for our own demise due to a lack of due diligence and grossly mis-placed trust in the very politicians who have ultimately betrayed their sacred trust; the very citizens they were elected to represent.
My only question is; where are the goddamn pitchforks and hangman’s noose?
Celsius 233
Addendum; my hyperbole aside, I can only conclude there isn’t enough pain, suffering, and death to spur the already destitute to their last course of action.