ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, December 30, 2004

Inflation v. Improvement

Nber_logo Measuring inflation is difficult.  It’s hard enough when the thing itself stays the same but the price changes, but what happens when the thing itself is becoming better?

That’s the problem examined in a new research paper from the National Bureau of Economic Research.  In Measuring the Growth from Better and Better Goods, Mark Bils of the University of Rochester examines the quality changes in consumer durable goods, and tries to figure out how much of the price increases are the result of inflation, and how much quality improvement.

His conclusion? Since 1988, price increases have reflected primarily changes away from older to new and better products, rather than inflation.

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