Open Thread: Hedonics - or "Dedonics" ?
One of the criticisms I've had about the way BLS calculates price inflation is the Hedonic adjustments applied by the Bureau. We'll spend some time in the near future discussing and debating the weaknesses of hedonics.
For those who may be unaware, Hedonics is the technique used (in theory) to separate the difference between inflation and "product improvement."
For tonight's open thread, I want to ask a slightly different question.
What aspects of the modern economy have resulted in product degradation, i.e., increased time consumption for services; on hold for tech support, weaker quality goods, or any other negative factors that are not otherwise incorporated into price?
Call these the "Anti-Hedonics." They are the effects of living in an "Always Low Prices" world that results in a poorer product or service for the same amount of money.
Question: What does the flipside of hedonics -– dedonics? -- look like?
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What say ye?
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Monday, July 07, 2008 | 07:00 PM | Permalink
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Food quality. Someone on this very blog described him/herself as a chemist who worked for a food company and said that his/her job was essentially to find ways to replace the more expensive food ingredients with cheaper fillers that tended to contain less nutritional value.
The trend has been with us for a long time. But, it's gone far enough that the very concept of "wholesome food" has become a "luxury" -- it's own niche(!) in the eyes of market regulators. (I.e., the FTC wanted to categorize WFMI and Wild Oats within their own separate "premium" market.)
Posted by: wunsacon | Jul 7, 2008 7:14:25 PM
Clothing: lower prices were achieved by substituting lower quality components (thinner fabric) and shoddier construction (single seam instead of double at stress points). So my clothes now cost less, but don't last as long. A "cheap t-shirt" now costs 9$ instead of 15$, but only lasts half as long. So I need to buy twice as many ...
I guess that's OK if you're a trendoid who would be constantly be replacing their wardrobe anyway, but for the rest of us, it's a loss disguised as lower prices.
Posted by: MouseJunior | Jul 7, 2008 7:17:32 PM
Should be "its", not "it's"...
Posted by: wunsacon | Jul 7, 2008 7:17:47 PM
cheap voice communication services (cell phone/long distance etc)
yes, the marginal cost of the extra minute of voice calling is basically zero.
however, just as cheap high fructose corn syrup encourages overconsumption/obesity, marginally free communications discourages prudent use of the phone.
eavesdrop on most any public cell phone call and you'll come to the conclusion that the person's call wasn't really THAT important.
Posted by: i'm just saying | Jul 7, 2008 7:19:21 PM
That's interesting, I didn't know there was a term for it. As an efficiency consultant there are many little things that drive me nuts and are sucking up our productivity:
Poor service - this has many faces but think of all the time you spend while a kid at McDonalds makes 5 attempts to give you extra mayo before finally giving up and calling the manager.
Just in time inventory - very sad when it's not in time for you. Also in this category is the "slow boat from china" problem that importers are well aware of.
Unscheduled repairs - Highways, air conditioner systems, heating systems, bridges - when did it become so uncool to do routine maintenance BEFORE things actually start to fall apart.
Of course the usual suspects of spam and telemarketing and the entire legal profession (I believe Douglas Adams' solution was to put them all on a rocket ship to another planet).
Plenty of things sucking up productivity, including the Web unfortnately. You are much more patient than I am finding new things to read - I mainly stick to my bookmarks these days as the trash factor has multiplied a lot faster than the good content seems to have...
Posted by: Phil | Jul 7, 2008 7:19:21 PM
Waiting in line at Costco which is even more crowded than ever. Waiting in line there when you only have a few items (but they are very big items). Not being able to buy bread there due to the fact that they only sell family size things. So they tell you to freeze it except why buy fresh bread and then freeze it? We buy pre preped salad occasionly and never ever finish the huge package in time. Never mind that it did cost less than a smaller package at a more "normal" store. It is just a % waste.
Posted by: alexd | Jul 7, 2008 7:26:24 PM
The whole phenomenon of hedonic pricing on cars.
Yes, cars have a million more features now. A million more things to break. I don't want a CD player, dual climate control, etc etc. How about a simple car that costs less that actually works. Heck, I don't even want cruise control, considering I rarely drive more than 15 miles in one direction, and it's all through relatively congested freeways.
Also, cars might be "cheaper" after hedonic adjustments, but of course, the inevitable repairs cost more, since everything is a fricking computer.
Posted by: David | Jul 7, 2008 7:26:24 PM
City "planing", or the lack thereof. It is a slow, insidious drip on the urban economy.
Example: when I lived in Boston I quickly determined that I had to pay for housing with a combination of three currencies: cash, time in travel, and increase in personal security. At best I could maximize 2 of the 3 variables, but either I paid more or it took longer to commute or the neighborhood was dicey. No way to find a nearby place that was inexpensive and safe, the city just isn't built that way. It's an economic structural flaw.
Knowing that the post-1950's US city is based on cheap vehicle fuel and house heating/cooling, urb/suburb/exurb I think that dislocations are to be expected. I see no components of inflation that take these into account.
Posted by: evanesce | Jul 7, 2008 7:35:07 PM
Joe Battapaglia is kicking some Don Luskin ass on Kudlow & Company tonight.
Hellava job, Joe! And we all appreciate your "Mark to Truth" mantra coined tonight very much!
That is what we are all about here on this site.
"Mark-to-Truth"
Damn straight!
Posted by: BG | Jul 7, 2008 7:36:46 PM
Airline tickets.
Posted by: Alex | Jul 7, 2008 7:39:45 PM
software used to come with a manual. now it doesn't. there are online alternatives, but a real manual would be worth something
i'm noticing more and more cars require premium gas.
airline tickets. smaller seats with less legroom. no free food/drink. extra charges for checked bags.
Posted by: bob | Jul 7, 2008 7:44:27 PM
Self service checkouts at the grocery store or Walmart -- especially if you get stuck in line behind someone who has no idea what they are doing.
A google on disruptive technology also generates some interesting ideas:
http://en.wikipedia.org/wiki/Disruptive_technology
Posted by: robrix | Jul 7, 2008 7:47:31 PM
Water quality. Whether justified or not, many people don't trust their tap. So, they buy bottled water.
I don't know whether water quality has really gotten worse or whether it's just perception. But, the perception change has been strong enough to change behavior, to prod people to buy lots of bottled water. Those bottled water sales should be excluded from GDP.
Posted by: wunsacon | Jul 7, 2008 7:51:45 PM
HFCS instead of sugar in soda pop; heck, HFCS in everything
Mandated ethanol in gasoline
Windows XP, Windows Vista
Posted by: Troy | Jul 7, 2008 7:52:50 PM
More planned obsolescence in virtually every product available. Want a mop? Go ahead -- buy it cheap. When you need a new mophead, that old one will no longer be in production. Want new garden gloves? Sure -- these will last you three weeks.
Also, the sneaky changing of the price/content ratio: Like a box of fig newtons? Only 4 bucks, and you get a whopping 14 oz! (used to be a lot more ounces of cookies and cereal out there).
Etc. etc.
Posted by: Maurice Hall | Jul 7, 2008 7:57:53 PM
Anything involving airline travel.
Posted by: Tom O | Jul 7, 2008 8:02:54 PM
How 'bout the folks in rural communities who live downwind from farms fertilized literally with (processed) NYC shit? They say the smell is "the worst".
Was a great article in Harper's on it.
It keeps costs down for NYC sanitation and for the farms. But, it makes some people miserable, in a way that AFAIK doesn't show up in any econometrics.
Posted by: wunsacon | Jul 7, 2008 8:09:40 PM
Right now, I've been on hold 20 minutes and counting to yell at Cablevision for not crediting returned equipment.
What about those cordless phones Panasonic makes? In 2-3 years, a few buttons will wear out on the phone and you need a new one. I screw them by opening up the phones and crazy gluing tinfoil to the backs and they work again.
Posted by: Steve Barry | Jul 7, 2008 8:12:23 PM
More planned obsolescence in virtually every product available. Want a mop? Go ahead -- buy it cheap. When you need a new mophead, that old one will no longer be in production. Want new garden gloves? Sure -- these will last you three weeks.
You might be interested in Cradle To Cradle.
Posted by: dr strangemoney | Jul 7, 2008 8:13:07 PM
"Free" Checking accounts. Spent part of a work day morning (about 20 minutes) on phone trying to correct a problem (payee claiming payment not received, bill payer online showing as paid) and getting nowhere -- literally stuck in a computer voice black hole. Ended up going in person to the branch office where account was opened, waiting, and finally getting a branch manager to help me get to bottom. If branch office was not nearby, would've been an even bigger frustration. As for the "Free" - they charge you for the online bill pay service!
Posted by: Sinomania! | Jul 7, 2008 8:17:34 PM
Being a sports fan... If my squad wasn't in a big market I wouldn't be able to stand it. Between the lack of parity, $60 tickets, $20 beers, and $15 hot dogs it's getting brutal.
Posted by: Brian | Jul 7, 2008 8:22:31 PM
It deserves repeating:
Windows Vista - also just about anything from Microsoft these days - Office 2007 tab bars that require twice as many key strokes, Hotmail pop-ups that cannot be deleted, minimized or moved out of the way. My next PC will be an Apple.
Posted by: bsneath | Jul 7, 2008 8:27:23 PM
Perhaps the opposite of hedonics is shedonics (or, w/ less grammatical parallelism, herdonics).
Posted by: Solodoc | Jul 7, 2008 8:27:38 PM
1) Education.
2) Shares of Citigroup.
3) The Educational value of buying shares of Citigroup.
Posted by: Winston Munn | Jul 7, 2008 8:29:53 PM
Cable television. I don't need or want a gazillion channels of crap. How about if I just pay by time my TV is actually on? How about bunde all my actual time used-- phone, tv, internet-- and offer a really great price?
Posted by: Jim Cosgrove | Jul 7, 2008 8:30:34 PM
