Doug Henwood dhenwood at
Tue Aug 22 07:47:44 PDT 2000

Marco Anglesio wrote:

>On Wed, 16 Aug 2000, Doug Henwood wrote:
>> hardware price indexes are falling at a 20-30% annual rate, and it's
>> argued that software indexes should be more like that, and less like
>> the 2-5% annual average drop the official numbers report.
>Possibly because software is marketed in a very different way than
>hardware. When you price a given piece of commodity hardware, it drops in
>price as new hardware arises. A given piece of software is sold at full
>price and then withdrawn. (Forgive my ignorance of price models, though).

A clarification: if the software gets better and the price is unchanged, this is registered in the price indexes as a decline in price. Just as today's $2,000 computer is a lot snazzier than the $2,000 computer from 2 years ago, even though it's still $2,000. So it's figured as a decline in real price, by 50% or more. It's really hard to believe that the "output" of the computer has doubled, even though its clock speed has, but that's the way these price indexes work.

Thanks for the rest of your comments, and to everyone else who's weighed in.


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