Examining Inflation

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Hristo Botev
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Re: Examining Inflation

Post by Hristo Botev »

jacob wrote:
Thu Feb 25, 2021 11:14 am
A smartphone is vastly more efficient in terms of replacing a telephone, a fax, a small and somewhat crippled computer, a cd player, a VCR, a radio, GPS, ... but this dinosaur is not aware of anything that a smartphone can do that one couldn't already do on other devices in 1980.
And all of those other devices are still around and working; whereas my iphone has to be replaced every handful of years! But @Qawzer's point is a good one that, notwithstanding the fact that those devices are all still around, I still use my iphone instead. I mean, I still use and prefer the "experience" of records and CDs, and using a desktop or laptop computer over a cell phone, but really as more of a novelty than anything else (probably more of a reflection of my GenX generation)--I mean, I've got my headphones in listening to digital music or podcasts via my iphone every morning/evening on my walking work commutes; I'm not lugging around a Technics record player or a Sony Walkman.
Qazwer wrote:
Thu Feb 25, 2021 11:00 am
You clearly value your iPhone.
I really, really want to push back and say: no I don't! I only have this stupid thing because I'm chained to it through work! But, you're right of course. It's difficult to separate the nostalgia from what's really valuable; as in, I reminisce of days gone by where I could do my job without a computer on my desk or a phone in my pocket, where I could dictate letters, briefs, and memos on a dictaphone for my secretary to type out. And I wouldn't be surprised at all if someone told me they'd done a study and found we lawyers were actually a helluva lot more efficient in the old days than we are now with our ability to dig holes and fill them back up again at a much more "productive" pace.

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Re: Examining Inflation

Post by jacob »

Alphaville wrote:
Thu Feb 25, 2021 11:38 am
it can take those things out of the ivory tower and from the upper classes and put them in the hands of the people is what.
I'll accept that but turn it around and ask rhetorically what technological wizardry the upper classes are currently buying at the cost of a small car (2021) that the hoi polloi will eventually see in 2071 for the price of $50?

(I can think of a few science fiction ideas like gene sequencing and CRISPR cures for some genetic disease... but as far as I know, they're just that. It's not for sale at the local CRISPR shop for $2500 ... like a 1987s XT computer was.)

Add: I probably just jinxed it ... and now people are frantically googling for gene-based goodies from renegade doctors. What I'm looking for is the equivalent shift of indoor-wc vs outhouse. In short, the upper classes are not flittering around in flying cars. They buy Teslas... but Teslas can't do anything gassers can't except go really fast from 0 to 60.

white belt
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Re: Examining Inflation

Post by white belt »

Alphaville wrote:
Thu Feb 25, 2021 11:38 am
we have a bit more market segmentation since the days of andy warhol but his take on the american genius is essentially correct.

this idea has now spread of course to other parts of the world so now the cokes are from china.
I don't really agree with Warhol's take. Maybe it was true back then with less wealth inequality and consumerism, but nowadays the rich don't buy the same thing as the poor. They drive different cars, eat different foods (organic,free-range, imported), drink different things (alcohol, bottled water, etc), go on different vacations, and so on. A Coke might still be a Coke to different classes, but the reality is the rich are buying some bespoke artisan version of Coke while the poor might be buying a generic version of Coke (RC cola?).

I admit I'm always a bit skeptical of those who try to downplay the differences between how the upper classes and lower classes live. Maybe social media has helped to expose some of those differences, as the lower classes now have a window into the daily lives of the upper class, but still I find it slightly absurd the "populist" airs that billionaires put on (whether it's Zuckerberg, Musk, or Trump).

Hristo Botev
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Re: Examining Inflation

Post by Hristo Botev »

Alphaville wrote:
Thu Feb 25, 2021 11:38 am
it can take those devices out of the ivory tower and from the upper classes and large institutions and put them in the hands of the people is what.
But these smartphones are now being bought and re-bought by "the people" every couple of years on credit, or installment, in some form or another (e.g., you get the phone now for free or for a discounted price in exchange for a 1 or 2 year inflated contract, or whatever). Whereas in the 70s/80s the VCR or stereo or whatever was likely bought on layaway, if not outright, because most consumers I think assumed it was a one-time purchase: as in, alright, I've got the stereo thing taken care of; now on to the camcorder or the analog camera or the VCR. So yes, "the people" are able to have all this stuff on demand in one device, but on both credit and via a subscription service payment model, to be repeated in 1 to 2 years when the current one becomes obsolete and/or is no longer supported. Whereas once you buy your stereo and your CD or record, it's yours--all you need to do is make sure you have electricity.

What I'm getting from all this is that it's REALLY hard to do an apples-to-apples analysis of inflation covering the past few decades; probably because we just consume so differently now than we used to; and what we consider "essential" or at least desirable has probably changed a lot.
Last edited by Hristo Botev on Thu Feb 25, 2021 12:09 pm, edited 3 times in total.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

Probably a false answer
My phone costs what a small car is worth in some countries where the average income is much less than here. The phone is quickly getting cheap enough to be available to them (not just shared).
It matters how you define the hoi poloi

I guess it also matters if you believe we are in a period of relative technological stagnation - funnily enough arguing we are in a period of relative equivalence between access to key technologies by class
I guess I will have to consider the importance of class differential as a function of technological improvement - maybe that is what I have been struggling with

Hristo Botev
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Re: Examining Inflation

Post by Hristo Botev »

white belt wrote:
Thu Feb 25, 2021 11:57 am
but nowadays the rich don't buy the same thing as the poor. They drive different cars, eat different foods (organic,free-range, imported), drink different things (alcohol, bottled water, etc), go on different vacations, and so on. A Coke might still be a Coke to different classes, but the reality is the rich are buying some bespoke artisan version of Coke while the poor might be buying a generic version of Coke (RC cola?).
I'm sure if DW were here she'd say (she of course loves it when I speak for her!), given her professional field in dietetics and diabetes, the rich are definitely not eating the same foods as the poor. Funny that it's Warhol's Coke that the modern day version of Liz Taylor probably wouldn't be caught dead drinking today; and if she drank it she'd see it as some sort of guilty pleasure she'd drink only behind closed doors.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

@white belt - do you personally value any of those though? I mean a lot
I do not know your value system for sure but indoor plumbing is huge for me
RC Cola is close enough to Coke for me

Edit - realized sounds snarky - not intended

But Jacob’s point of relative spread of technology is totally flipping my world view and trying to digest its implications
Last edited by Qazwer on Thu Feb 25, 2021 12:23 pm, edited 1 time in total.

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Alphaville
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Re: Examining Inflation

Post by Alphaville »

jacob wrote:
Thu Feb 25, 2021 11:49 am
I'll accept that but turn it around and ask rhetorically what technological wizardry the upper classes are currently buying at the cost of a small car (2021) that the hoi polloi will eventually see in 2071 for the price of $50?

[...]What I'm looking for is the equivalent shift of indoor-wc vs outhouse. In short, the upper classes are not flittering around in flying cars. They buy Teslas... but Teslas can't do anything gassers can't except go really fast from 0 to 60.
well the romans already had indoor plumbing so it only took us 2000 years to make that universal(ish). not a huge technological leap, just democratization. india still lagging.

there is a really funny mexican expression to alert one of danger and provoke a fast reaction, like if you're about to be run over by a car or about to touch a live electric wire and need to jump back: "aguas!" and "aguas" means literally "waters" and it referred to the flying contents of chamber pots out of windows and onto the public ways. probably the reason capes were fashionable. so here's to the end of capes. but the expression is still in use to this day. aguas!

cholera, anyone?

i think 50 years to take the networked computer from the military compounds of a superpower to the pockets of the poor of the world is not a bad timeline at all.
Last edited by Alphaville on Thu Feb 25, 2021 12:19 pm, edited 1 time in total.

white belt
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Re: Examining Inflation

Post by white belt »

Hristo Botev wrote:
Thu Feb 25, 2021 11:45 am
I really, really want to push back and say: no I don't! I only have this stupid thing because I'm chained to it through work! But, you're right of course. It's difficult to separate the nostalgia from what's really valuable; as in, I reminisce of days gone by where I could do my job without a computer on my desk or a phone in my pocket, where I could dictate letters, briefs, and memos on a dictaphone for my secretary to type out. And I wouldn't be surprised at all if someone told me they'd done a study and found we lawyers were actually a helluva lot more efficient in the old days than we are now with our ability to dig holes and fill them back up again at a much more "productive" pace.
I also have an iPhone that I enjoy many of the benefits of. In my case, I like listening to macroeconomics podcasts while I'm driving or cooking. This is something that would technically be possible just with a computer or previous generation MP3 player, but nevertheless does provide immense value to my life.

I'm by no means a Luddite, but I am extremely picky with only adopting technology that I feel provides net value in my life. For example, I don't use streaming services or own a TV because I just think the risk of a time sink outweighs the potential benefits of occasional entertainment. I think one useful thing is to think of technology from a tool perspective. Like a tool, every piece of technology serves a purpose. For example, I'm not going to continue to play with a power drill once I've drilled my hole. Now I admit this gets trickier with something like smartphone because it can serve lots of valuable purposes, while at the same time turn into a massive time sink because it is designed to suck you in for long periods. I think Cal Newport has some good writings on using technology productively, while avoiding some of the common pitfalls.

Now in terms of inflation, I am in agreement that CPI is not very effective measuring stick because it leaves out a lot of things and is prone to political manipulation (high inflation is bad for votes, so there is always a huge incentive to downplay it). I also think there's some normalcy and recency bias going on in regards to inflation numbers since the US hasn't seen substantial inflation since the 1970's, so you're seeing a lot of denial (e.g. inflation happens in banana republics and third world countries, but not here!). Also keep in mind that reported inflation numbers always lag behind.

We've already seen widespread price inflation in asset markets (stocks, bonds, real estate) from loose monetary policy, which does have an indirect affect on real-world prices due to the wealth effect. With the commitment to larger fiscal policy starting with COVID19 and moving into the future, it seems logical to think we are going to see even CPI inflation in 2021 and through the foreseeable future. In fact, if you want to be somewhat conspiratorial/cynical, you could argue that the ruling class in the USA recognizes that inflation is the only way to solve the widespread debt issues that plague the government and society today, so it's going to end up being the least bad solution to get our society to some sort of reset. Inflation is another way to transfer wealth from the baby boomers (most prosperous generation ever in combination with over-promised entitlements) to the millennial/Gen Z generation (least prosperous generation who have started demonstrating their discontent through violence).

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Re: Examining Inflation

Post by Alphaville »

Hristo Botev wrote:
Thu Feb 25, 2021 12:03 pm
But these smartphones are now being bought and re-bought by "the people" every couple of years on credit, or installment, in some form or another (e.g., you get the phone now for free or for a discounted price in exchange for a 1 or 2 year inflated contract, or whatever). Whereas in the 70s/80s the VCR or stereo or whatever was likely bought on layaway, if not outright, because most consumers I think assumed it was a one-time purchase: as in, alright, I've got the stereo thing taken care of; now on to the camcorder or the analog camera or the VCR. So yes, "the people" are able to have all this stuff on demand in one device, but on both credit and via a subscription service payment model, to be repeated in 1 to 2 years when the current one becomes obsolete and/or is no longer supported. Whereas once you buy your stereo and your CD or record, it's yours--all you need to do is make sure you have electricity.

What I'm getting from all this is that it's REALLY hard to do an apples-to-apples analysis of inflation covering the past few decades; probably because we just consume so differently now than we used to; and what we consider "essential" or at least desirable has probably changed a lot.
yes consumption has changed, but it also took years to pay off of the encyclopedia and then it was outdated. nothing was ever made to be just a one time purchase though. before the vcr and the stereo the radio was a large piece of expensive furniture that needed a qualified technician to repair, and before that you had to keep feeding rolls to your piano player.

credit is not bad also when it's put to productive uses.

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Re: Examining Inflation

Post by Hristo Botev »

@alphaville: No doubt, but this whole discussion I think is one of the rate of change/obsolescence. I expect the piano we inherited from DW's grandparents to be just as useful when we pass it on down the line; there's a piece of technology we never had to buy, and it's one either DS or DD (haven't decided yet!) will also never have to buy.

ETA: Did the encyclopedia become outdated? I get that there are things that aren't in there that would be now, and of course it's outdated in the sense that Wikipedia et al. have replaced them. But if my kids need to look something up for a school project, chances are the information in my dad's encyclopedia set bought in the 80s or 90s will get them where they need to go. (Admittedly, to your ancients/moderns quarrel, I'm also one to think that we've probably not improved much in the past few centuries on a classical education based in the Greeks and Romans; which is also why I don't think my dad's Mortimer Adler "Great Books" collection is outdated either.)
Last edited by Hristo Botev on Thu Feb 25, 2021 12:34 pm, edited 2 times in total.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

CPI is the worst thing except for all the rest. All the different variants have flaws, domain specificity issues, political capture etc etc But it is better than nothing
You can tell if an wages or approximately increasing or staying the same or even decreasing over time.
I have no idea whether we are about to enter inflation (MMT or even just stimulus), deflation (demographic changes, productivity declines that Jacob is indirectly highlighting with stagnation of technology) or no change
But without something like CPI, I do not know how you can tell

I guess you could use the answer indirect earlier in the thread of not care - it is a function of only your personal expenses compared to your current income (may have misread implications of statement though) - this answer bugs me though and I should figure out why
Last edited by Qazwer on Thu Feb 25, 2021 12:34 pm, edited 1 time in total.

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Re: Examining Inflation

Post by Alphaville »

white belt wrote:
Thu Feb 25, 2021 11:57 am
I don't really agree with Warhol's take. Maybe it was true back then with less wealth inequality and consumerism, but nowadays the rich don't buy the same thing as the poor.
well they never did in the first place, and i mentioned greater market segmentation today, but american style capitalism is basically about selling to the mass consumer not the aristocracy.

now that idea has moved east, and china has lifter billions out of poverty. this is a country that had a terrible famine just 60 years ago.

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Re: Examining Inflation

Post by Alphaville »

Hristo Botev wrote:
Thu Feb 25, 2021 12:28 pm
@alphaville: No doubt, but this whole discussion I think is one of the rate of change/obsolescence. I expect the piano we inherited from DW's grandparents to be just as useful when we pass it on down the line;
not the piano, but the piano player. you had to buy rolls of music and load it and the piano would play the roll with a windup mechanism. it was cheaper than having an actual musician but still required constant purchasing.

acquiring the skill of piano playing is/was a massive conspicuous display that signified someone was free of having to labor and could afford delicate fingers. a whole family member devoted to musical entertainment-- that was reserved for aristocrats.

imagine the price of that vs. a basic spotify subscription.
Last edited by Alphaville on Thu Feb 25, 2021 12:37 pm, edited 1 time in total.

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Re: Examining Inflation

Post by Hristo Botev »

Alphaville wrote:
Thu Feb 25, 2021 12:35 pm
What? So now my Appalachian Scotch-Irish ancestors are aristocrats because they entertained themselves by playing music on their front porch on instruments that had been in the family for generations?

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Re: Examining Inflation

Post by Alphaville »

Hristo Botev wrote:
Thu Feb 25, 2021 12:36 pm
What? So now my Appalachian Scotch-Irish ancestors are aristocrats because they entertained themselves by playing music on their front porch on instruments that had been in the family for generations?
well i don't know the circumstances, but there have always been "aristocrats" among the poor who shunned hard work and pursued leisure.

there were also middle class people with aspirations of aristocracy who might, say, invest in piano lessons on a promising daughter.

but leisure has not been cheap since we invented agriculture.

see:veblen

Qazwer
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Re: Examining Inflation

Post by Qazwer »

@HB your ancestors back enough generations moved here to be rich compared to what the English would have done to them - so they could afford leisure

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Re: Examining Inflation

Post by Bankai »

Last decades of XIX/early decades of XX century was basically a harvest of low hanging fruits on unprecedenced scale. This is obviously not going to be repeated anytime soon. That doesn't mean progress stopped or slowed down, it's simply not that visible in a day to day life. There are no new breakthrough household goods or gadgets every several years anymore (other than nonsense like egg cooker etc.). However, most things are getting cheaper and way better and there are many innovations 'in the backgroung' that most people don't know about. The internet hasn't even been mentioned and it's the biggest gamechanger in a century. Healthcare made great progress. Consider no.1 killer: in 1970 a person with a heart attack who made it to the hospital had 40% chance of dying. Today it's 10%. That's a 75% reduction in mortality. Or consider coronavirus: it took 2 days to sequence the virus and another 2 to translate that sequencing data into an RNA molecule that would trigger an immune response. What if covid happened in1970? There's this myth in every era that the best times (the golden age) are gone and the world is going downhill. It might eventually be right, maybe in 100 years, maybe in a 1000 or a 1000000. But definitely not yet.
Last edited by Bankai on Thu Feb 25, 2021 12:44 pm, edited 1 time in total.

Hristo Botev
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Re: Examining Inflation

Post by Hristo Botev »

This is what I mean about consumption has changed. Spotify is sheer consumption. Buying an instrument and taking care of it and learning to play it and entertain yourself and others with it is both consumption and production. And bluegrass music, etc. has nothing to do with middle class people aspiring to aristocracy; it's just how they entertained themselves in the evenings. If video killed the radio star, then radio killed the family bluegrass band, because they could hear a more talented "specialist" perform the same song on the radio via the Grand Ole Opry; so, front porch jam sessions were replaced by living room radio hours. Production went the way of consumption. So how do you account for that when tracking for inflation?

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Re: Examining Inflation

Post by Alphaville »

Hristo Botev wrote:
Thu Feb 25, 2021 12:44 pm
So how do you account for that when tracking for inflation?
oh, i don't track inflation :lol:

but yes, the economy keeps changing from producerism to consumerism.

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