Monday, March 15, 2010

Keeping Inflation Numbers Low?

Inflation basket: Lip gloss added to 'typical shop'

New gadgets tend to go down in price rapidly as production is geared up and techniques improved. Therefore does adding new technology to the basket periodically supress inflation? e.g. I'm sure a Blue Ray player will go down in price, but a disposable camera will probably go up as there are no further production savings to be had. Similarly in the 2000s they brought in mobile phones and got rid of disposable razors. A whole separate issue is 'planned obsolescence'. Companies design products that will wear out and go out of fashion on purpose so you will buy replacements. e.g. I bet you replace your mobile phone a lot more often that you do the hairdryer that's going out of the basket. They only track the price, not how long the product will last.

Posted by ontheotherhand @ 05:20 PM (1552 views)
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10 thoughts on “Keeping Inflation Numbers Low?

  • tenyearstogetmymoneyback says:

    This is as good as official confirmation that the price of Blu-ray players is going to plummet, probably down to the £25 level that DVD players are now.

    As an electronics engineer I know that the only real difference between a Blu-Ray and DVD player is a more advanced
    laser and more transistors in the ICs to decode the picture. As withe any new product yields were poor on the first lasers and
    only a couple of companies had the equipment to make them. Moore’s law describes a long-term trend in the history of computing hardware, in which the number of transistors that can be placed inexpensively on an integrated circuit has doubled approximately every two years. Therefore, (if it isn’t possible already) it will be soon be possible to put the entire functions of a Blu-Ray player onto one cheap I.C.

    Regarding the comments by ontheotherhand a colleague has commented that items reach their optium design just at the point where
    they are becoming obsolete. It certainly happened with VCRs with the most recent ones having about 1/10th of the number of parts of the
    originals.

    Including these sort things in the inflation figures is a nonsense. The sort of luxury goods I would put in would be a Gold Necklace 🙂

    A final comment, how many times are you likely to buy a Blu-Ray player ?

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  • crash bandicoot says:

    Taking this further off topic…

    Blue-ray looks to me like the next Betamax/8-track/BSB Dish/Mini Disc. All were technically superior formats but were beaten in the market by higher-volume opposition.

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  • the number cruncher says:

    Most of my friends and relatives have moved to downloading HD films by bit-torrent (illegal I know, but a victimless crime far more than HPI). I have a 280 quid 32inch lcd HD TV and I play hd films from a cheap laptop into the Telly.

    Why do I need a blue-ray player? My movies cost nothing, quick and simple to download, they can be put on my car TV for the kids and on my phone. I would be happy to pay for a service as good as bit-torrent if it offered all its advantages and was reasonably priced an say the price of a cinema ticket.

    Blue-ray is a expensive impractical technology that has already been superseded, download services will make it obsolete within a couple of years

    As TYTGMMB said they will be flogging them for £25 quid each in 3 years time. A real measure would be a unchanging commodity such as the average price of a hard drive, irrespective of size or the average cost of a sky subscription.

    Anyway must dash as the 1st episode of Pacific(band of brothers against the Japs) has just downloaded and I am off to watch it in HD, took me 28 minutes to download – the same time as to read these threads and type my response. Blue ray owners can wait 6 months and then have massive restrictions on its use.

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  • tenyearstogetmymoneyback says:

    the number cruncher said “A real measure would be a unchanging commodity such as the average price of a hard drive, irrespective of size”

    That wouldn’t be a bad idea. They haven’t changed much in construction in the last ten years, needing a PCB, motors, and a precision machined case. Some people claim that they will be obsolete soon now that you can buy 128GByte solid state drives. However, it will be some time before solid state drives are cheaper than the same size hard drives.

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  • fallingbuzzard says:

    It doesn’t matter what’s on the list. Its the weightings applied for items on the list that matters which is why most people scream “inflation”.

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  • Double Glazed And Confused says:

    I have a question that relates to all this. Does the inflation level dictate what increases in national output are due to price rises and what are due to productivity improments? I ask this because I think that part of the reason that stockmarkets have risen is due to the inflation that happened over past 2 years and the expectation of future inflation (that on top of the rebound, general speculation and currency shifts). For instance when wheat went up in price and weetabix went up in price the company that makes weetabix reported an increase in revenue but they were still selling the same amount of biscuits they just charged more for them. If you look at all the small things you used to buy many daily consumerables under £1 have increased in price by 50% to 100%.

    So in summary the question is “Would under reporting inflation lead to over reporting of GDP? If not how do you calculate GDP?”

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  • mark wadsworth says:

    Being fair to the ONS, when they chuck stuff out of the basket and put new things in (like a Blu Ray player or whatever), then they recalculate what inflation would have been as if Blu Ray players had always been in there.

    And yes, we know perfectly well that UK inflation has been a game of two halves over the last ten or fifteen years – domestic inflation (mainly services) has been fairly steady at 4% and ‘imported’ inflation (mainly goods) has been between 0% and price deflation of 2%.

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  • number cruncher – downloading HD films by bit-torrent is not a victimless crime. You are hiking the prices for those honest people who pay to watch, and stealing form the pockets of those who produce and distribute it. If everyone pirated and never paid for content, then no new content would ever be made.

    Shame on you.

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  • the number cruncher says:

    orcusmaximus – I am afraid you are wrong as your scenario would only come about if it affected my purchasing habits – which it has not. I have stolen no money and economically affected no copyright holder, as he would not have received my money in the first place.

    Therefore it is a victimless crime, it is like the sound of one hand clapping.This is the free market in operation and copyright holders should adapt to new technology and provide us with a service – not a monopoly. Because media companies invest in monopolistic practices I have used the only power open to me – I have gone on strike. Rupert Murdock or the heirs of Walt Disney will not receive one penny from me, whatever happens.

    But before you just accuse me of being a freeloader I do have a number of subscriptions to media services I do value, one such is a monthly payment to the real news network, which has a business model I do approve of: http://therealnews.com/t2/

    Intellectual property rights are the enclosure acts of the mind. Copyright should just be for allowing business to get rewarded for innovation and investment, but most copyright legislation suppresses innovation and only creates monopoly.

    I should imagine if I like the latest Tom Hanks/Speilburg epic a box set will be bought for a present for someone by me and they will receive they return on investment.

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  • orcusmaximus says:

    number cruncher – how can it not affect your purchasing habits? If you weren’t occupying (some of) your free time watching pirated films, you would be entertaining yourself in some other way, conceivably spending money in doing so.

    Media companies are do not invest in monopolistic practices since you have plenty of other ways of finding entertainment, quite aside from media productions by independent companies, or home done stuff on YouTube. The simple fact is that you prefer to watch the results of someone’s 20 million dollar investment, without paying for the privilege. That’s theft.

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