I get that computer processing speeds are up and so is data storage capacity but it is the notion that because computers are more "powerful" they are more productive that I have some trouble buying into. In many cases processing time on a project remains the same because more data is being crammed into the project. A good example is GIS. More data is being rendered in several different formats. Now while this may be a qualitative change in the product I wonder if it is an instance of being more productive (useful). My friends in the GIS industry are always attempting to wow me with their latest graphical rendering of land usage. Despite receiving a steady stream of new machines with bigger processors and bigger storage capacity they are also still going for coffee to wait for their machines to finish processing and rendering the data and still scavenging for storage space. I am not saying they are necessarily spending as long at the coffee maker but the doubling of their processing power has not translated into a halving of their wait times. Moreover, Doubling of processing power has not translated into products that have allowed for a doubling of conservation efforts or subdivision planning. They all have slicker presentations to make their pitch however.
The neoclassical's violate their own marginal productivity theory every time they calculate the productivity of machines from the price of those machines. Hedonic pricing makes an even bigger mess of the whole problem. In the neoclassical marginal productivity theory the price of capital must be derived from its productivity not vice-a -versa. So simply calculating productivity by multiplying a nominal figure by some imputed coefficient derived from a guess about the relationship between processing power and efficiency seems like a boondoggle to me.
It seems to me that it is better to simply stick with nominal values discounted for inflation. if GDP per capta goes up and the total hours of work remains the same along with levels of capital investment then it would be reasonable to infer that labour productivity has been increased by investment in better equipment and or managerial control. I am not convinced that it is possible to dissagregate the components of productivity anymore than this.
Travis ----- Original Message ----- From: "Doug Henwood" <dhenwood at panix.com> To: <lbo-talk at lbo-talk.org> Sent: Saturday, February 07, 2004 1:20 PM Subject: Re: [lbo-talk] hedonic pricing update
> T Fast wrote:
>
> >All things being equal a $500,000 log loader made today is much more
> >"productive" than a $500,000 dollar log loader purchased 20 years ago.
How
> >is this tracked?
>
> They try. The theory of price indexes operating in both the BLS
> (which does the consumer and producer price indexes) and the BEA
> (which does the GDP-related ones) is to hold quality constant and
> isolate pure price changes. That's a lot easier with a simple, slowly
> changing gadget like a log loader (whatever that is - is it a
> Canadian thing?) than it is with computers. And they're not comparing
> a 2004 log loader with a 1984 one. They're stringing together
> comparisons of a 1985 model with a 1984, 1986 with 1985, etc.
>
> My favorite counter-example is what's happened to the airfare
> components of the CPI since dereg. With more stops and tighter
> advance purchase restrictions, quality has declined markedly despite
> an apparent decrease in ticket prices. So the airfare subindex has
> actually risen much more than broader averages.
>
> >This is not the first time there has been a steady growth in the quality
of
> >the means of production while at the same time a decrease in its cost.
> >Steam power was initially expensive and of low quality and as we all know
it
> >later became ubiquitous in certain sectors both because its quality
improved
> >and cost came down. What makes computers so different that they require
> >"hedonic" pricing?
>
> Because of the speed and intensity of change. The late-2001 titanium
> Powerbook G4 I'm typing this on seemed pretty snazzy two years ago.
> Now it's seeming a little constrained & poky. So that has to be
> accounted for somehow. But it's far more apparent if I'm editing a
> large Photoshop doc than if I'm just typing an email. What's the
> "real" increase in output between a late-2001 vintage machine and
> today's? The BLS PC price index says it's 56% more. Is it really?
>
> >Would not some review of the capital controversy help to think through
what
> >is at stake here?
>
> Official statisticians are neoclassicals - they don't do the capital
> controversy. How would you apply it?
>
> Doug
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