An Inteseting Statistical Series

Paul Henry Rosenberg rad at gte.net
Fri Jan 22 16:21:42 PST 1999


Enrique Diaz-Alvarez wrote:


> Paul Henry Rosenberg wrote:
> >
> > Enrique Diaz-Alvarez wrote:
> >
> > > It seems like wages are inflation-adjusted, but the Dow is not. It would
> > > be interesting to rerun the numbers, and I suspect you will get a _much_
> > > more impressive series if you start in 1974 (bottom of bear market,
> > > wages peak).
> >
> > Not only is the Dow not inflation-adjusted, it's composition is changed
> > over time to get rid of "mature", lower-performing stocks and add new,
> > dynamic, higher-performing ones.
> >
>
> I was just saying that it wouldn't be a fair comparison unless you use
> either nominal wages or inflation-adjusted Dow numbers.

My point is that the Dow isn't an objective measure in the first, since it's basis changes over time more to suit promotional/ideological purposes than for any objective reasons. Inflation-adjusting it is an interesting exercise, but it only produces a more plausible psuedo-indicator of reality.

Still, so long as you know what it is.

But if you want to do it, then HOW do you adjust it properly? I mean, people don't convert 100,000 share of stock into CPI-type stuff.

Is there a atandard measurement that econmists agree to use, just to do things more-or-less consistently? Or is it a total smoke-and-mirrors operation?

-- Paul Rosenberg Reason and Democracy rad at gte.net

"Let's put the information BACK into the information age!"



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