A quick note. An ONS report today on hedonic quality adjustment carries the following table showing the items for which hedonic quality adjustment is performed in the CPI basket:
Table 2: Hedonic items in the UK consumer price statistics
|PCs||1996||CPI – 2003
RPI – 2004
Source: Office for National Statistics
And that’s it! (For background on hedonic quality adjustment, the BLS has a nice FAQ.)
I was very surprised to discover that hedonics are only applied to such a small set of items. The ONS note that the US, by contrast, adjusts for items described as “Clothing, Footwear, Refrigerators, Washing Machines, Clothes Dryers, Ranges & Cooktops, Microwave Ovens, TVs, DVD Players”.
The ONS say they find hedonics complicated and expensive; for goods which are now weighted less than than 1% in the CPI basket, it’s hard not to be sympathetic:
In practice hedonics has proven to be a resource intensive process in the ONS and therefore a costly method. This is due to a number of factors, including the technical nature of the method and the large volume of price and product attribute data that needs to be collected and managed for the production of each hedonic model. Additionally, each hedonic model is updated several times a year to stay relevant to technology changes (for example the introduction of Windows 8 in 2012) which compounds the work involved.
Those who believe that “the price index” captures something real, tangible, and objectively measurable, should be wondering how it is possible to make an objective assessment of the change in PC quality taking account of the “introduction of Windows 8”!