Hedonic Adjustments and the Mulligans of Monetary Policy

This is a piece by the ever popular Mogambo Guru, from a couple of years ago. He is retired, now, but still makes a post every now and then, on his own site.  I’m not sure just how active he is, these days.

Hedonic adjustments are applied to the consumer price index, employment statistics and other data provided by the government, to deflate or inflate the current numbers.

It all depends on what picture they want you to see.  Never mind the root word.  That is for them, not you.  Please click the heading to read the complete article.  It also includes a short bio, at the bottom.

        

Hedonic Adjustments and the Mulligans of Monetary Policy

By The Mogambo Guru | 08/02/10
  

I knew it was going to be “one of those days” when, on the very first fairway, this new guy Bob says that he thought my tee shot had landed over there behind those trees, and how he is surprised to see that my golf ball is now sitting on the fairway, and another twenty yards further towards the hole, too.

Of course, I knew where he was headed with this, and I took charge of the situation by patiently explaining how he was just a stupid layman, while I was the hotshot economist who knows how price increases are “hedonically adjusted” to make things look better, a skill that I apply to my tee shot by adding back the yardage lost to the slice by rectifying the original curved trajectory, thus adding 20 yards to my distance off the tee, and then averaging my distance off-line with the exponentially-weighted average of previous shots on the first tee, a lot of which were on the other side of the fairway, thus placing me, statistically, here, on the fairway, just right of center. Moron.

Well, there was a heated discussion, ending with me yelling, “Alright, then, Mister Moron, then how in the hell do you reconcile the latest government report, which admits to using hedonic adjustments of all kinds to disguise inflation in prices, showing a mere 1.1% year-over-year inflation in consumer prices, with the fact that The Economist magazine has ‘All Items’ inflation at a terrifying 13.1%, with ‘Food’ being up the least of all categories – and by a long shot! – at an even more terrifying 5.4%?!?”

Apparently, the use of the interrobang as punctuation, to indicate my complete exasperation and befuddlement, really set ol’ Bob off, and he was, from then on, perfectly agreeable that I was within my rights to apply such logical reasoning to golf, even going so far as to provide myself with a “free lift” out of pesky greenside sand traps by merely “adjusting the market basket” of golf hazards, modeled on another splendid hedonic adjustment that the Fed applies to reduce actual price inflation.

I admit that I was already a bit testy, as the day before I had received the bill with my new, higher health insurance premium. If you want to see real inflation, my health insurance premium is (gulp!) up 13%, and is now $14,280 per year!

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About ace5ace

60, roaming the Ozarks.
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