While I believe having access to these things is wonderful for me, none of the above means that large swaths of the economic strata are seeing actual wage gains. These are two different issues; being able to hail an Uber ride from your iPhone is not very meaningful if those services can only be paid for by sacrificing something essential.
• Inflation: The good news is that flat-panel televisions, tablets, tech gadgets, toys -- many of the things we want and enjoy -- have tumbled in price as a result of widespread adoption and economies of scale. The bad news is that costs for health care, housing and education have consistently been rising at rates much faster than the CPI.
We have deflation in the things we want, but inflation in the things we need.
For a different take, consider the Massachusetts Institute of Technology’s Billion Price Project, which tracks all sorts of prices found online. If anything, it shows that the official CPI basket of goods in recent years has been understating the rate of inflation.
This is not a bug but a feature. It was created in part by that same hedonic-adjustment process. There’s a backstory here: In 1995, the Boskin Commission was charged with revising the Bureau of Labor Statistics inflation measure. The unofficial goal was a backdoor way to lower inflation readings to reduce cost of living adjustments (COLAs) for Social Security and other government spending. No surprise that the committee found several dishonest ways to claim CPI inflation was overstated. One was substitution, the idea that people switch to less expensive chicken when beef prices rise; the other was the aforementioned hedonic adjustment.
How much middle-class wages rise or not is a separate issue from whether some items cost more or less than they once did.
The misleading argument mentioned in the article cited at the start of this column seems to come up with startling regularity theses day. The poor and middle class have it so good, but they just don’t know it! Why the average person living today has it better than Louis the XIV ever did. They have great indoor plumbing, centrally heated housing and flat-panel TVs galore! If they only would just enjoy their smart phones, we all would be better off by virtue of not having to hear their whining.
Someday, maybe writers will stop making these silly comparisons. But I’m not going to count on it.
This column was provided by Bloomberg News.