What percentage of total computing power is represented by PCs? How does one calcalute the declining prices of computing power as new functions are continuously enabled? What measure should we use to determine the falling costs of communications? Why should a productivity measure be welfare-sensitive? How does passing off a challenge to a government economist constitute a reply? And what is one to make of your yawning about the recent study of Popkin or Grant's unclear criticism of the hedonic price index or the upcoming problems of adjusting to the latest industrial revolution? Won't I get more honest, searching answers to such questions in the business press which you and others here should doubtless observe more carefully? Your 'reply" is attached below. JC
>From: Doug Henwood <dhenwood at panix.com>
>Reply-To: lbo-talk at lists.panix.com
>To: lbo-talk at lists.panix.com
>Subject: RE: small not beautiful
>Date: Thu, 28 Sep 2000 13:43:14 -0400
>
>jan carowan wrote:
>
>>Mr Henwood, you provide no grounds for this conclusion. During the
>>past 25 years, the cost of computers has dropped approximately one
>>millionfold.
>
>The output of computers isn't megaflops, it's the useful manipulation
>of data. I doubt the average user feels 20% more productive than last
>year.
>
>> Yet the BLS shows merely an annual drop varying between 14.9% in
>>1992 and 6.7% in 1994.
>
>Where? They only started reporting PCs in the CPI in 1997, and that
>price index is off 20% over the last year. The implied deflator in
>the BEA's computer output measure is off 18% a year since 1987, and
>around 20% over the last year.
>
>> In 1998, the government finally recognized that computer prices
>>were dipping 40 percent per year. But meanwhile, the spearhead of
>>real price reductions shfited to a collapse in the price of
>>communications, which is mismeasured as a modestly declining cost of
>>long distance voice telephony.
>
>You know, government statistical geeks aren't stupid people. But no
>doubt you're much much smarter than they are.
>
>>I have given examples of how and why productivity is indeed
>>underestimated in the brokerage and banking industry--no reply.
>
>Ever take up your concerns with a BLS economist? They're very
>accessible - call the number on the latest productivity release and
>have a chat.
>
>> Through Mr Forstater, Mr Wray simply replied that an increase in
>>shares traded does not register in GDP--which was completely
>>question-begging.
>
>So you're claiming that faster share turnover is an improvement in
>human welfare? Even though nothing is produced as a result?
>
>> The Popkin and Co. report indicates why industrial output is being
>>underestimated. Again no reply. You simply scoff at these reasoned
>>attempts to redefine the measurements. In the FT, Mr Grant recently
>>argued against the American use of the hedonic price index while
>>alleging that its inability to truly capture product innovation
>>leads to an overestimation of productivity increases! As I said to
>>Mr. Forstater, the more revolutionary the new economy, the more
>>painful the adjustments and the less pleasant reality should soon
>>be. So I do not understand the logic of your argument at all. It
>>should be noted that the inevitable downturn period for adjustments
>>will most probably be prolonged by anti business tax and regulatory
>>policy forced upon the American people by leftist business observers
>>and their ilk.
>
><yawn>
>
>>And what exactly does that have to do with your rant against the new
>>economy. The problem of health insurance predates the new economy.
>>However the recent bottom up income gains do not.
>
>They were a lot better in the days of the Old Economy. But that's
>history, which involves books, and all that tedious stuff.
>
>Doug
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