Measure what users value in what they actually buy, rather than the numbers of boxes that leave the factory. Fix the deflators and follow things through the input-output tables summarizing the...
Someone help me! I think I know what a hedonic adjustment is. But I also know how TV prices work. They are low to the consumer because the consumer is not the customer--the information brokers are. Dumb TVs cost more than smart TVs, if you can find them at all. After all, dumb TVs don't generate a lucrative information stream.
Would this be a negative hedonic adjustment to the consumer--less utility (i.e., privacy) for less money? Is the consumer defined as a sum of consumer and broker? How does this generalize to the entire consumer electronics industry? Somebody help me!
Precision machining, which makes up a good fraction of macro-scale high tech manufacturing, has become substantially more efficient and more capable just in the last 30 years. And compared to 50 years ago the advances in material science + machining have been exponential. So I'm not sure where that productivity increase is disappearing to.
> sPh: Precision machining, which makes up a good fraction of macro-scale high tech manufacturing, has become substantially more efficient and more capable just in the last 30 years. And compared to 50 years ago the advances in material science + machining have been exponential. So I'm not sure where that productivity increase is disappearing to...
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DELONG’S GRASPING REALITY: Trying to make my readers—and myself—smarter. I think I am a go-to source to understand things economic in the past and in the present. Too online since 1995. **Currently featuring**:
I haven't take the time to build a formal model of this (and perhaps I should learn how to do so) but the software and peripherals sectors reinvest at much higher rates than conventional heavy manufacturing, chemicals, and materials, which at the sectoral level have 1.5-2x the payout ratio, ostensibly to compensate for their lower overall growth rates. My intuition here is that this is a sort of Matthew effect, where the fundamental asymmetries in growth/$ invested cause more capital to flow into software/computer hardware/electronics, which over the medium term results in a lot of productivity gains turning into pure improvements in quality through learning-by-doing because the barrier to investment necessary to turn productivity gains into growth-qua-growth just isn't available.
I'm writing this as a chemist/materials scientist, so my perspective is admittedly a bit biased but I have tried to think about this a lot for purely selfish reasons. If I have the fundamental economics wrong, please point me toward some reading to straighten myself out.
So if we have underestimated true TFP because improved quality [hedonics] have been so poorly estimated, why are so many goods "made by US firms" getting demonstrably worse? Planned obsolescence in autos was famous in teh US until the Japanese invasion of better quality autos (which also nearly destroyed the UK car industry). Yet today, "quality goods" are not better than previous eras. They don't last as long, with features that are prone to break because they are made with inferior components. Some of this is due to outsourcing to Chinese manufacturers, but in silicon chips, quality is now outsourced to TSMC, which has truly left most chip manufacturers behind. But the rest of the manufacturing industry? Are we sure that the hedonic calculations are real, as opposed to theoretical?
I thought US GDP did include deflators, which is why US inflation rates were lower than EU rates. But if we have truly underestimated TFP, shouldn't that also impact US GDP and inflation rates, requiring an adjustment?
Perhaps it's time for a new quantification foundation for the old economic terms taking into account what is being made, how it's used and the various ways so many more aspects of production, transportation and consumption can be measured. In real time, mind you.
My anti AGI comments might project a luddite sensibility but I believe we humans have barely begun to plumb productivity advances (sorry Ty Cowen, lots of low hanging fruit left) made possible by networked computing.
Too much focus on bleeding investment flows stifling innovative thinking.
Someone help me! I think I know what a hedonic adjustment is. But I also know how TV prices work. They are low to the consumer because the consumer is not the customer--the information brokers are. Dumb TVs cost more than smart TVs, if you can find them at all. After all, dumb TVs don't generate a lucrative information stream.
Would this be a negative hedonic adjustment to the consumer--less utility (i.e., privacy) for less money? Is the consumer defined as a sum of consumer and broker? How does this generalize to the entire consumer electronics industry? Somebody help me!
Precision machining, which makes up a good fraction of macro-scale high tech manufacturing, has become substantially more efficient and more capable just in the last 30 years. And compared to 50 years ago the advances in material science + machining have been exponential. So I'm not sure where that productivity increase is disappearing to.
Very good point:
> sPh: Precision machining, which makes up a good fraction of macro-scale high tech manufacturing, has become substantially more efficient and more capable just in the last 30 years. And compared to 50 years ago the advances in material science + machining have been exponential. So I'm not sure where that productivity increase is disappearing to...
===
DELONG’S GRASPING REALITY: Trying to make my readers—and myself—smarter. I think I am a go-to source to understand things economic in the past and in the present. Too online since 1995. **Currently featuring**:
* Consequences of the Revolutions of 1848: Élite Recognition that "If Everything Is Going to Stay the Same, Everything Has to Change..." <https://braddelong.substack.com/p/draft-consequences-of-the-revolutions>
* The Fourteen-Lion Parade <btps://braddelong.substack.com/p/fourteen-lion-parade>
* How We All Already Have Our Superintelligent AI-Assistants <https://braddelong.substack.com/p/what-is-man-that-thou-art-mindful>
I haven't take the time to build a formal model of this (and perhaps I should learn how to do so) but the software and peripherals sectors reinvest at much higher rates than conventional heavy manufacturing, chemicals, and materials, which at the sectoral level have 1.5-2x the payout ratio, ostensibly to compensate for their lower overall growth rates. My intuition here is that this is a sort of Matthew effect, where the fundamental asymmetries in growth/$ invested cause more capital to flow into software/computer hardware/electronics, which over the medium term results in a lot of productivity gains turning into pure improvements in quality through learning-by-doing because the barrier to investment necessary to turn productivity gains into growth-qua-growth just isn't available.
I'm writing this as a chemist/materials scientist, so my perspective is admittedly a bit biased but I have tried to think about this a lot for purely selfish reasons. If I have the fundamental economics wrong, please point me toward some reading to straighten myself out.
So if we have underestimated true TFP because improved quality [hedonics] have been so poorly estimated, why are so many goods "made by US firms" getting demonstrably worse? Planned obsolescence in autos was famous in teh US until the Japanese invasion of better quality autos (which also nearly destroyed the UK car industry). Yet today, "quality goods" are not better than previous eras. They don't last as long, with features that are prone to break because they are made with inferior components. Some of this is due to outsourcing to Chinese manufacturers, but in silicon chips, quality is now outsourced to TSMC, which has truly left most chip manufacturers behind. But the rest of the manufacturing industry? Are we sure that the hedonic calculations are real, as opposed to theoretical?
I thought US GDP did include deflators, which is why US inflation rates were lower than EU rates. But if we have truly underestimated TFP, shouldn't that also impact US GDP and inflation rates, requiring an adjustment?
Perhaps it's time for a new quantification foundation for the old economic terms taking into account what is being made, how it's used and the various ways so many more aspects of production, transportation and consumption can be measured. In real time, mind you.
My anti AGI comments might project a luddite sensibility but I believe we humans have barely begun to plumb productivity advances (sorry Ty Cowen, lots of low hanging fruit left) made possible by networked computing.
Too much focus on bleeding investment flows stifling innovative thinking.