# Re: Some Econ Pessimism?

Alexander Chislenko (alexc@firefly.net)
Thu, 13 Feb 1997 21:53:00 -0500

At 08:31 PM 2/13/97 -0500, Michael Lorrey wrote:

>Do you take Moore's Law into account? Considering the amount of our
>lives that now has to do with information and data processing, etc. some
>of the key products to put in your basket are basic units like mips,
>megs, bits, kilobaud, and dpi.

I would agree that counting these things is better than not counting.
This doesn't help that much though. I'll try to give two examples.

1. Let's try to compute inflation.
Suppose the following goods were sold in the following years:

1980 1997

Quantity price, Quantity price,
sold each sold each

Bicycles 1 \$100 1 \$200
Megs 1 \$100 1000 \$0.20
Bauds - - 56K \$0.001

Suppose the quality doesn't change (ha-ha).

Inflation on bicycles: about 4% a year
Inflation on Megs: about -40% a year.
Inflation on Bauds: ?

Now, more interesting:

Inflation on bicycles AND Megs.

Method 1.

A 1980 typical basket of 1 bike +1 meg costs \$200 in 1980
and \$200.2 in 1996. Inflation = 0.

On the other hand, a typical 1997 basket of 1 bike and 1000 megs
in 1997 cost \$400, and would have cost \$100,000 in 1980.

So which basket should we count?

- and this all for the same goods of the same quality.

Now add bauds to the picture. And Netscape. And 60 million web pages
you can look through. And ideas on architectures of complex systems that
appeared while people were building all of these. Still, these things
are just resources - and you can do use them to produce results that
were not even in anybody's imagination in 1980. And those *results*
are the things you want to count.

2. Another economic problem: a breast cancer patient had to pay \$5000
for painful treatment and a coffin in 1980, and \$20,000 in 1997 - for a
(painless) treatment only. The coffin doubled in price, but it is no
longer needed, as the patient now survives.
What is the inflation rate here?

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