For example, let's say a Filipino barber can cut 3000 heads of hair per year. If you buy him a $50 electric razor, he can cut 4000 heads of hair per year. Let's say a haircut costs $15 in the US, so that's an added PPP value of $15,000. A US barber who could cut 1,000 more heads of hair per year would make $15,000 more. But haircuts in the Philippines are about 100 pesos each: $1.71 USD. So, this is increase in productivity only amounts to 100,000 pesos or $1710 USD more.
Both Filipino and American barbers would love to spend their money on iPhones. An iPhone 15 costs about 57,000 pesos. (About $973 USD) So a Filipino barber cutting 1,000 more heads of hair in the Philippines can buy about 1.75 more iPhones than before. An iPhone 15 in the US costs $799 (actually cheaper than in the Philippines!) So an American barber cutting 1,000 more heads of hair in America can buy 18.77 more iPhones! Both might have a total PPP productivity of $60,000 per year, but the American barber is clearly richer.
Also, if you we're an investor, and you just looked at the PPP numbers, you might think: "Wow! A $50 investment can increase productivity by $15,000? hWhy isn't everyone investing in the Philippines?" But in actuality, a $50 investment in a Filipino barber only increases productivity by $1710 USD. Still good, but not as good.
Versus: Imagine a $50 investment in an improvement to a Chinese factory that increases widget production by 1000 widgets per year. They sell for $30 (216.80 RMB). Materials cost $15. So $15 markup. (108.40 RMB). Whether the widgets are sold in China or the US, they sell for essentially the same price in USD. So, in terms of PPP, investing in this factory improvement increases productivity by $15,000. Same as the investment in Filipino barbers. But in nominal terms, it's much higher: $15,000 vs $1710. ROI of 29,900% vs 3320%. So, better to invest in a Chinese factory than a Filipino barber.
I don't know hwhy China is more export-oriented than the Philippines. Why doesn't the Philippines set up more factories? I don't know. But I do know that being export-oriented and getting foreigners' money is key to economic success! And one of the reasons hwhy investors don't invest more in third-world countries, despite impressive PPP GDP growth, is because the nominal returns aren't as impressive. American investors want more USD, not more haircuts, not more PHP. And lack of foreign investment holds these countries back from further GDP growth. Both nominal and PPP.
I'm generally an optimist. But I think inflation measures underestimate true inflation. Note: I am Canadian so I'm a lil more familiar with the Canadian situation, so I will discuss things from that perspective. I have three main reasons: The most common CPI measures used by the Central Bank for monetary policy purposely exclude outliers, CPI understates the rise in housing costs and CPI understates the effect of fluctuating foreign exchange.
1. The most common CPI measures used by the Central Bank for monetary policy purposely exclude outliers: The Bank of Canada prefers to use CPI-trim, CPI-median and CPI common. Both CPI-trim and CPI-common are both designed to exclude items with very high inflation or deflation. So, if gas prices went up a lot, the CPI-trim and CPI-median ignore them! So, inflation doesn't look as bad.
2. The CPI basket doesn't adequately account for rising housing prices. StatsCan doesn't fully account for housing costs for owned housing because they consider housing to be an investment asset, not a consumer good. i.e. If you buy a house for $700,000, you will get that $700k back. And then some. So, it's not right to consider the $700k as consumed, unlike, say, a cookie. If you spend $700k on a cookie and then eat that cookie, it's gone. You don't get that $700k back. This is a good point. But I will address the problem with that, a little later. But first, let's consider how home prices are reflected in the CPI basket:
* Rent: Rent paid by renters represents about 6.7% of the market basket
* Mortgage interest: Interest rates can rise due to rising interest rates or rising house prices. So rising home prices are indirectly reflected in mortgage interest. This represents about 3.5% of the market basket. hWhich seems a little low, tbh. I suspect that most Canadian homeowners are spending a lot more than 3.5% of their income on mortgage interest. Interestingly, prior to 2021, StatsCan only included new homes in the mortgage interest measure. Not resale homes.
* Property taxes: Since these are based on home prices, this indirectly reflects housing prices. But it is a very small part of the basket. In fact it's bundled with "Other owned accommodation expenses" which represent about 3.1% of the market basket.
* Finally, we have Homeowner's replacement cost. Which is basically depreciation. This represents 5.6% of the market balance. But I take issue with the way this number is calculated. They take aggregate housing prices and (lazily) multiply them by a (national?) house/property ratio (which they don't tell us!) then multiply that by 1.5%. Interestingly, the Canada Revenue Agency allows a Capital Cost Allowance of 4% and up on rental buildings. ( https://www.youtube.com/watch?v=XF2ayWcJfxo )
So, 1.5% depreciation seems rather low. Let's assume the building is about 50% of the total house price, for a $700,000 home. That's $5250 per year. Or $437.50 per month of depreciation. Yea, I think it's more than that.
But, even if these figures accurately reflect the amounts and share of income that Canadians spend on the "consumed" part of housing and StatsCan is right to exclude housing prices in general, cause they are an "investment asset". OK, but this "investment" crowds out other investments! If you didn't have to spend so much on a downpayment and mortgage payments, you could invest more in other assets like stocks, mutual funds and ETFs. Although housing prices are high and rising too fast, compared to consumer goods, as an investment assets, they are lousy! An $200,000 house purchased in Jan 2005, would be worth about $618,000 today. $200,000 invested in QQQ in 2005, would be worth about $2,488,000 today. That's a HUGE opportunity cost! And a big damper on Canadians' ability to build long-term wealth. Perhaps, this doesn't belong in the CPI, but hwhere does it belong? hWhere do we measure this?
3. The CPI doesn't accurately reflect fluctuating exchange rates. In June 2011, 1 USD cost $0.978 CAD. In June 2019, 1 USD cost $1.354 CAD. That's a 38.4% increase. Over the same time period, the Bank of Canada's inflation calculator said inflation was up by 13.8%. I know that not everything we consume is imported. But a lot of it is! So, given the increased cost of imports, I'd expect inflation over this time period to be, idk, at least half of 38.4%. Even if we're not importing, we're exporting. A Canadian farmer sells to both Canadians and Americans. Seeing the cost of the USD go up by 38.4%, that means it costs him more to buy an American tractor. So, he raises the price of his corn from $1 CAD per ear to $1.25 CAD per ear. Given the changing exchange rate, that went from $1.02 USD to 92 cents USD. For Americans, that's a bargain. They're paying less. But Canadians are paying more. Given that we're a small country, I think a LOT is either imported or exported. So, given the HUGE increase in the price of USD vs the small increase in the official CPI, yea... I think CPI figures are undercounting the true rise in the cost of living. I'm not sure hwhy or how, but they are.
How could this possibly be true? As defined in the article: "So-called 'price indices' attempt to measure the price of consuming goods and services that yield a constant level of 'utility' (satisfaction) over time."
But all attempts to measure overall life satisfaction or joy or any other utility type concept show essentially unchanged overall utility since at least the 1970s. However, incomes -- even real incomes -- have increased massively over that time. On that definition it *must* be true that the price index must have changed to cancel the increase in incomes.
EDIT: The answer is that this isn't what a price index measures. But that makes the linked article deeply flawed because it claims it tries to measure how much you need to spend to get the same utility. It doesn't. It measures something more like how much you would value goods then versus now in an economic exchange.
I buy a new phone whenever the battery starts to die on the old one or it in some other way runs out. Whatever the new model is, I can’t really see any improvement that I notice in at least the last decade. If I could pay less for a “new” phone identical to my old with a working battery over buying the new model for a lot more, but apple doesn’t give me that option (they also stop supporting really old models, and some apps don’t work on them). I’d have a hard time telling you what the utility of the new model is over the old, though I guess some statistician at the government reads something into my purchasing decision.
"But all attempts to measure overall life satisfaction or joy or any other utility type concept show essentially unchanged overall utility since at least the 1970s. " 1. Can you give sources or at least some sources for this claim?, 2. Are you not just a bit skeptical of any attempt to measure utility? I am not necessarily disagreeing with this assertion, but that is a huge claim ("all attempts --all!)
In the USA it actually seems like it might be going down. You can google to find some other versions but nothing I've ever seen has shown massive increases.
Am I skeptical? Sure it's a hard thing to figure out. But so much the worse for the price index if that's what it wants to measure. You can't argue that because it might be hard to measure therefore we know it's the opposite of the data we have.
Let me ask you, based on your own personal experience, do people around you seem much happier than people with the same relative position in US (or wherever you live) life when you were growing up?
While I gave you one cite there are a bunch of other attempts to measure utility/happiness in various ways such as asking people at random times how happy they are (random beepers) or looking at how many people report they are depressed. And while I wouldn't trust any individually the fact that none of them report massive increases in happiness in most advanced economies (US western Europe) over the past 60 or so years -- though do for countries that have pulled out of poverty -- and that this matches our personal intuitions that people don't seem deeply more joyful now than in the 70s.
And sure, maybe this gets it a bit wrong. But Bryan is trying to argue that the **true** price index repudiates any claim of stagnation. In other words, if we adjust incomes by the true price index we should see something like 4-5% increases per year in **utility**. Compounded over 50 years that means people should have like 7 times as much utility which may not make sense per se but is incompatible with the apparent fact that people in the developed world haven't become way more happy.
--
To be clear, the problem is ultimately that this just **isn't** what a price index actually tries to measure. What it actually tries to measure is something more like "if you could barter with people in the past how much would they pay for stuff now if you somehow suppressed relative effects (e.g. no valuing an iphone more in 1970 because it's unique). But it makes the whole article kinda bullshit as a result since what it claims to talk about isn't what it's measuring.
I think the biggest issue is that satisfaction/joy/utility are stabilizing in humans, in that we notice changes but basically just return to a baseline level after a little bit. I suspect that no matter when in history we could travel to and deploy surveys we would find that people were basically just about as happy, so long as they were not actively starving or being killed at the moment, anyway. Cross country surveys tend to pan out that way.
There is also the worrisome possibility that people will spend money on things that actively make them less happy. That probably was always true, but it feels a bit more true recently, or at least there are many more options for such items now.
I don't know that that follows. Firstly, you would need rich people and poor people to have different happiness levels, which doesn't seem to be the case reliably (as reliably as happiness literature gets, at least.) We can't normalize prices to happiness levels if wildly different baskets of goods produce roughly the same amount of happiness.
You might be able to grope at it by measuring the income level where increasing money stops making people happier on average. I think that was something like 75$K a decade or so ago. Then you could compare the goods and services people consume at those different levels and try to normalize. Seems nearly impossible to do well, since many things would be like "live in a better neighborhood" and "lives in the country where 60k goes a long way" and things like that.
Instead of using happiness, it might be worth adjusting price indexes based on how many hours it takes the median wage earner to buy certain goods. Still misses adjustments for value, but if happiness is tied to relative good quality based on current standards, maybe that works?
Right, ultimately, the problem is that a price index doesn't do what is claimed in the article -- try to figure out how much money now buys an equivalent level of utility. Utility just doesn't work nicely enough as you point out.
What it measures is something more like how much would someone from the past pay for the goods available now if you suppress effects about it being unique or better than everything else.
But that makes the article linked fundamentally mistaken because it claims it is talking about the utility thing.
Even bigger issue: how in the world do you measure utility? Any claim to it rising, falling, returning to a baseline presumes we can measure it.
Also, we need to distinguish between ex ante or expected happiness and ex post happiness. We have all bought products, which at that time we thought would in some sense raise our utility, but only after experiencing it did we discover it did not. Same with human relationships. Even addiction can be "rational" --see Gary Becker's work.
For that matter you can't really measure happiness relative to multiple events, just as a general vibe. If you try and measure pre-post purchasing something, you are going to be doing an awful lot of measuring over an awful lot of people.
All the worse for the argument in the linked article then no? If we can't even measure utility then we can't possibly know the amount of consumption necessary to produce the same utility and certainly can't know that incomes adjusted by this factor are going up much less quickly -- only way we could know that is if we knew that utility was rapidly increasing.
Bulverism + Goodhart. Winship proves his measures measure what they measure, then explains why people are stupid for caring about other things instead (e.g. their lives getting worse every year/decade).
Mr. Winship insights are worth noting, but one doesn't have to do anything, either prove or disprove, just watch the economy, given Mr Winship's observations, and see what unfolds
Another thing: Market basket measures, like PPP, underestimate the poverty of "third world" countries.
Edited to Add: This isn't my original idea. It comes from: https://ideas.repec.org/p/ecm/latm04/75.html
For example, let's say a Filipino barber can cut 3000 heads of hair per year. If you buy him a $50 electric razor, he can cut 4000 heads of hair per year. Let's say a haircut costs $15 in the US, so that's an added PPP value of $15,000. A US barber who could cut 1,000 more heads of hair per year would make $15,000 more. But haircuts in the Philippines are about 100 pesos each: $1.71 USD. So, this is increase in productivity only amounts to 100,000 pesos or $1710 USD more.
Both Filipino and American barbers would love to spend their money on iPhones. An iPhone 15 costs about 57,000 pesos. (About $973 USD) So a Filipino barber cutting 1,000 more heads of hair in the Philippines can buy about 1.75 more iPhones than before. An iPhone 15 in the US costs $799 (actually cheaper than in the Philippines!) So an American barber cutting 1,000 more heads of hair in America can buy 18.77 more iPhones! Both might have a total PPP productivity of $60,000 per year, but the American barber is clearly richer.
https://www.apple.com/ph/iphone/
https://www.apple.com/iphone/
Also, if you we're an investor, and you just looked at the PPP numbers, you might think: "Wow! A $50 investment can increase productivity by $15,000? hWhy isn't everyone investing in the Philippines?" But in actuality, a $50 investment in a Filipino barber only increases productivity by $1710 USD. Still good, but not as good.
Versus: Imagine a $50 investment in an improvement to a Chinese factory that increases widget production by 1000 widgets per year. They sell for $30 (216.80 RMB). Materials cost $15. So $15 markup. (108.40 RMB). Whether the widgets are sold in China or the US, they sell for essentially the same price in USD. So, in terms of PPP, investing in this factory improvement increases productivity by $15,000. Same as the investment in Filipino barbers. But in nominal terms, it's much higher: $15,000 vs $1710. ROI of 29,900% vs 3320%. So, better to invest in a Chinese factory than a Filipino barber.
I don't know hwhy China is more export-oriented than the Philippines. Why doesn't the Philippines set up more factories? I don't know. But I do know that being export-oriented and getting foreigners' money is key to economic success! And one of the reasons hwhy investors don't invest more in third-world countries, despite impressive PPP GDP growth, is because the nominal returns aren't as impressive. American investors want more USD, not more haircuts, not more PHP. And lack of foreign investment holds these countries back from further GDP growth. Both nominal and PPP.
I'm generally an optimist. But I think inflation measures underestimate true inflation. Note: I am Canadian so I'm a lil more familiar with the Canadian situation, so I will discuss things from that perspective. I have three main reasons: The most common CPI measures used by the Central Bank for monetary policy purposely exclude outliers, CPI understates the rise in housing costs and CPI understates the effect of fluctuating foreign exchange.
1. The most common CPI measures used by the Central Bank for monetary policy purposely exclude outliers: The Bank of Canada prefers to use CPI-trim, CPI-median and CPI common. Both CPI-trim and CPI-common are both designed to exclude items with very high inflation or deflation. So, if gas prices went up a lot, the CPI-trim and CPI-median ignore them! So, inflation doesn't look as bad.
https://www150.statcan.gc.ca/n1/pub/11-627-m/11-627-m2017043-eng.htm
2. The CPI basket doesn't adequately account for rising housing prices. StatsCan doesn't fully account for housing costs for owned housing because they consider housing to be an investment asset, not a consumer good. i.e. If you buy a house for $700,000, you will get that $700k back. And then some. So, it's not right to consider the $700k as consumed, unlike, say, a cookie. If you spend $700k on a cookie and then eat that cookie, it's gone. You don't get that $700k back. This is a good point. But I will address the problem with that, a little later. But first, let's consider how home prices are reflected in the CPI basket:
* Rent: Rent paid by renters represents about 6.7% of the market basket
* Mortgage interest: Interest rates can rise due to rising interest rates or rising house prices. So rising home prices are indirectly reflected in mortgage interest. This represents about 3.5% of the market basket. hWhich seems a little low, tbh. I suspect that most Canadian homeowners are spending a lot more than 3.5% of their income on mortgage interest. Interestingly, prior to 2021, StatsCan only included new homes in the mortgage interest measure. Not resale homes.
* Property taxes: Since these are based on home prices, this indirectly reflects housing prices. But it is a very small part of the basket. In fact it's bundled with "Other owned accommodation expenses" which represent about 3.1% of the market basket.
* Finally, we have Homeowner's replacement cost. Which is basically depreciation. This represents 5.6% of the market balance. But I take issue with the way this number is calculated. They take aggregate housing prices and (lazily) multiply them by a (national?) house/property ratio (which they don't tell us!) then multiply that by 1.5%. Interestingly, the Canada Revenue Agency allows a Capital Cost Allowance of 4% and up on rental buildings. ( https://www.youtube.com/watch?v=XF2ayWcJfxo )
So, 1.5% depreciation seems rather low. Let's assume the building is about 50% of the total house price, for a $700,000 home. That's $5250 per year. Or $437.50 per month of depreciation. Yea, I think it's more than that.
But, even if these figures accurately reflect the amounts and share of income that Canadians spend on the "consumed" part of housing and StatsCan is right to exclude housing prices in general, cause they are an "investment asset". OK, but this "investment" crowds out other investments! If you didn't have to spend so much on a downpayment and mortgage payments, you could invest more in other assets like stocks, mutual funds and ETFs. Although housing prices are high and rising too fast, compared to consumer goods, as an investment assets, they are lousy! An $200,000 house purchased in Jan 2005, would be worth about $618,000 today. $200,000 invested in QQQ in 2005, would be worth about $2,488,000 today. That's a HUGE opportunity cost! And a big damper on Canadians' ability to build long-term wealth. Perhaps, this doesn't belong in the CPI, but hwhere does it belong? hWhere do we measure this?
https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2023003-eng.htm
https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2023007-eng.htm
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes-depreciable-property.html#class1
https://www.crea.ca/housing-market-stats/mls-home-price-index/hpi-tool/
3. The CPI doesn't accurately reflect fluctuating exchange rates. In June 2011, 1 USD cost $0.978 CAD. In June 2019, 1 USD cost $1.354 CAD. That's a 38.4% increase. Over the same time period, the Bank of Canada's inflation calculator said inflation was up by 13.8%. I know that not everything we consume is imported. But a lot of it is! So, given the increased cost of imports, I'd expect inflation over this time period to be, idk, at least half of 38.4%. Even if we're not importing, we're exporting. A Canadian farmer sells to both Canadians and Americans. Seeing the cost of the USD go up by 38.4%, that means it costs him more to buy an American tractor. So, he raises the price of his corn from $1 CAD per ear to $1.25 CAD per ear. Given the changing exchange rate, that went from $1.02 USD to 92 cents USD. For Americans, that's a bargain. They're paying less. But Canadians are paying more. Given that we're a small country, I think a LOT is either imported or exported. So, given the HUGE increase in the price of USD vs the small increase in the official CPI, yea... I think CPI figures are undercounting the true rise in the cost of living. I'm not sure hwhy or how, but they are.
https://www.google.com/finance/quote/USD-CAD?window=MAX
https://www.bankofcanada.ca/rates/related/inflation-calculator/
How could this possibly be true? As defined in the article: "So-called 'price indices' attempt to measure the price of consuming goods and services that yield a constant level of 'utility' (satisfaction) over time."
But all attempts to measure overall life satisfaction or joy or any other utility type concept show essentially unchanged overall utility since at least the 1970s. However, incomes -- even real incomes -- have increased massively over that time. On that definition it *must* be true that the price index must have changed to cancel the increase in incomes.
EDIT: The answer is that this isn't what a price index measures. But that makes the linked article deeply flawed because it claims it tries to measure how much you need to spend to get the same utility. It doesn't. It measures something more like how much you would value goods then versus now in an economic exchange.
I buy a new phone whenever the battery starts to die on the old one or it in some other way runs out. Whatever the new model is, I can’t really see any improvement that I notice in at least the last decade. If I could pay less for a “new” phone identical to my old with a working battery over buying the new model for a lot more, but apple doesn’t give me that option (they also stop supporting really old models, and some apps don’t work on them). I’d have a hard time telling you what the utility of the new model is over the old, though I guess some statistician at the government reads something into my purchasing decision.
good point! For once, I agree with you on something! 😛
"But all attempts to measure overall life satisfaction or joy or any other utility type concept show essentially unchanged overall utility since at least the 1970s. " 1. Can you give sources or at least some sources for this claim?, 2. Are you not just a bit skeptical of any attempt to measure utility? I am not necessarily disagreeing with this assertion, but that is a huge claim ("all attempts --all!)
https://worldhappiness.report/ed/2019/the-sad-state-of-happiness-in-the-united-states-and-the-role-of-digital-media/
In the USA it actually seems like it might be going down. You can google to find some other versions but nothing I've ever seen has shown massive increases.
Am I skeptical? Sure it's a hard thing to figure out. But so much the worse for the price index if that's what it wants to measure. You can't argue that because it might be hard to measure therefore we know it's the opposite of the data we have.
Thanks. This seems like a pretty thin reed.
I agree that is hard thing to figure out which just about any conclusion about changes in utility highly suspect.
Let me ask you, based on your own personal experience, do people around you seem much happier than people with the same relative position in US (or wherever you live) life when you were growing up?
While I gave you one cite there are a bunch of other attempts to measure utility/happiness in various ways such as asking people at random times how happy they are (random beepers) or looking at how many people report they are depressed. And while I wouldn't trust any individually the fact that none of them report massive increases in happiness in most advanced economies (US western Europe) over the past 60 or so years -- though do for countries that have pulled out of poverty -- and that this matches our personal intuitions that people don't seem deeply more joyful now than in the 70s.
And sure, maybe this gets it a bit wrong. But Bryan is trying to argue that the **true** price index repudiates any claim of stagnation. In other words, if we adjust incomes by the true price index we should see something like 4-5% increases per year in **utility**. Compounded over 50 years that means people should have like 7 times as much utility which may not make sense per se but is incompatible with the apparent fact that people in the developed world haven't become way more happy.
--
To be clear, the problem is ultimately that this just **isn't** what a price index actually tries to measure. What it actually tries to measure is something more like "if you could barter with people in the past how much would they pay for stuff now if you somehow suppressed relative effects (e.g. no valuing an iphone more in 1970 because it's unique). But it makes the whole article kinda bullshit as a result since what it claims to talk about isn't what it's measuring.
I think the biggest issue is that satisfaction/joy/utility are stabilizing in humans, in that we notice changes but basically just return to a baseline level after a little bit. I suspect that no matter when in history we could travel to and deploy surveys we would find that people were basically just about as happy, so long as they were not actively starving or being killed at the moment, anyway. Cross country surveys tend to pan out that way.
There is also the worrisome possibility that people will spend money on things that actively make them less happy. That probably was always true, but it feels a bit more true recently, or at least there are many more options for such items now.
Sure, and if true then -- as defined in the article -- the price index must change so that the average income produces the same utility.
I don't know that that follows. Firstly, you would need rich people and poor people to have different happiness levels, which doesn't seem to be the case reliably (as reliably as happiness literature gets, at least.) We can't normalize prices to happiness levels if wildly different baskets of goods produce roughly the same amount of happiness.
You might be able to grope at it by measuring the income level where increasing money stops making people happier on average. I think that was something like 75$K a decade or so ago. Then you could compare the goods and services people consume at those different levels and try to normalize. Seems nearly impossible to do well, since many things would be like "live in a better neighborhood" and "lives in the country where 60k goes a long way" and things like that.
Instead of using happiness, it might be worth adjusting price indexes based on how many hours it takes the median wage earner to buy certain goods. Still misses adjustments for value, but if happiness is tied to relative good quality based on current standards, maybe that works?
Right, ultimately, the problem is that a price index doesn't do what is claimed in the article -- try to figure out how much money now buys an equivalent level of utility. Utility just doesn't work nicely enough as you point out.
What it measures is something more like how much would someone from the past pay for the goods available now if you suppress effects about it being unique or better than everything else.
But that makes the article linked fundamentally mistaken because it claims it is talking about the utility thing.
Even bigger issue: how in the world do you measure utility? Any claim to it rising, falling, returning to a baseline presumes we can measure it.
Also, we need to distinguish between ex ante or expected happiness and ex post happiness. We have all bought products, which at that time we thought would in some sense raise our utility, but only after experiencing it did we discover it did not. Same with human relationships. Even addiction can be "rational" --see Gary Becker's work.
For that matter you can't really measure happiness relative to multiple events, just as a general vibe. If you try and measure pre-post purchasing something, you are going to be doing an awful lot of measuring over an awful lot of people.
All the worse for the argument in the linked article then no? If we can't even measure utility then we can't possibly know the amount of consumption necessary to produce the same utility and certainly can't know that incomes adjusted by this factor are going up much less quickly -- only way we could know that is if we knew that utility was rapidly increasing.
Bulverism + Goodhart. Winship proves his measures measure what they measure, then explains why people are stupid for caring about other things instead (e.g. their lives getting worse every year/decade).
The TRUTH! Yeah ...
Compared to (anything) economic, the conundrum of Trump's Ear is child's play.
Mr. Winship insights are worth noting, but one doesn't have to do anything, either prove or disprove, just watch the economy, given Mr Winship's observations, and see what unfolds
"Watch the economy" to me is a blind man feeling a herd of stampeding elephants.
Yes, there ARE certain economic things you can watch, if only fleetingly.
- Blind Man Feeling for All I'm Worth