Regarding US GDP growth, as soon as you realise that they have been using hedonic pricing and others have not, GDP goes out the window as a meaningful indicator. Those whom the Gods wish to destroy They first make mad. -- Euripides
A hedonic price index for a specific good is based on the price of the good's various characteristics. For example, hedonic price indices are often applied to computers. The price of a computer can be explained as the price of its processor speed, memory, hard drive capacity, and so on. Hedonic price indices can vary over time as the prices of the underlying characteristics change.
Just to take an example, let's say the UK produced one computer in 1975, and sold that computer for 1 million pounds in nominal currency, and say that is 2 million pounds in real terms, when reflected in today's currency. Today, 2006, they produce that computer and sell it for 2 thousand pounds. Surely you are not saying that the UK GDP component for computer (remember only one made and sold in each of those years) means that in real terms the GDP has dropped from 2 million pounds in 1975 to 2 thousand pounds in 2006. Is that what you are saying? If not, please explain how "other" countries are addressing this issue.
Note one thing though: it is a different thing to say that (i) hedonic pricing should not be used and that (ii) using it one way in one country and another in another country distorts comparisons. In the long run, we're all dead. John Maynard Keynes
To the second, did you know that countries other than the US were using these tools? Why was only the US being bashed, by you and others? It seemed pretty clear from your and Migeru's comments that you were saying hedonic pricing should not be used--and all the vitriol was aimed at the US,,,,saying that it was being done by the Americans to make their numbers look better. What was that all about?
