PeakTrader.com

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PeakTrader said...

In the Information Revolution, inflation has been overstated and real GDP has been understated.

Also, increasingly larger U.S. trade deficits (reaching 6% of GDP in the mid-2000s) subtract from U.S. GDP.

So, the U.S. is even more energy efficient than the data show.

The U.S. not only leads the world in the Information and Biotech Revolutions (which produce lighter goods), it leads the rest of the world combined (in both revenue and profit).

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Morganovich, actually, the U.S. Information Revolution was greater than the U.S. Industrial Revolution, because the U.S. not only created enormous real wealth in the domestic economy, it captured enormous real wealth in the global economy.

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I guess, people like Bart miss the good old days, like the 1970s, when Americans lived in smaller houses or apartments with asbestos, drove around in Ford Pintos, VW Bugs, or AMC Pacers, worked with typewriters, or performed boring and repetitive work in factories, in the heavily polluted cities, didn't have to worry about choices, because there was little to choose from, etc..

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Morganovich says: "you still have never provided a single reason that it would lead to under-counted productivity."

I've provided a reason before:

Robert Solow: "You can see the computer age everywhere but in the productivity statistics."

The paradox has been defined as the discrepancy between measures of investment in information technology and measures of output at the national level.

"Investment has gone into our 'unmeasurable sectors,' and thus its productivity effects, which are likely to be quite real, are largely invisible in the data."

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Mike, I've stated before:

It's less productive to invent and build new technology, the way productivity is measured, than to operate and maintain it.

Nonetheless, the inventions and improvements of new products at a faster rate in the Information Revolution raised living standards at a faster rate.

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I've also stated before:

It was not only the invention of the product itself, in the Information Revolution, it was also the speed of improvements to the invention and the increase or decrease in price.

For example, how much better was a 2005 computer compared to a 1985 computer?

How much better was a 1975 typewriter compared to a 1955 typewriter?

And what were the price differences?

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Thomas Edison made a huge investment inventing the light bulb and said:

"I have successfully discovered 1,000 ways to NOT make a light bulb."

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PeakTrader said...

U.S. living standards, labor standards, and environmental standards are much higher today compared to the 1970s, which indicate inflation has been overstated and real growth has been understated.

Obviously, the U.S. had strong disinflationary growth at the height of the Information Revolution from 1982-07. If nominal GDP growth averaged 6%, living standards likely improved at least 4% on average.

Of course, some Americans gained more than others, like the 10,000 workers at Microsoft who became millionaires, petroleum engineers earning well over $100,000 a year, or even immigrants with little education and english living in nice houses and driving in new trucks through hard work.

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Even depressions are better today.

The only similarity between the Great Depression and the depression of the past four years is the percentage of actual output below potential output.

I suspect, most Americans don't know we're in another great depression.

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Jon Murphy, yes, the next depression, e.g. in the 2030s, will be much harder to avoid.

The current depression either could've been avoided or a V-shaped recovery could've been achieved.

This unnecessary depression will make the future depression even worse.

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It seems, some people are confused about the general price level of goods & services and asset prices.

Some prices of goods & services are in an uptrend or downtrend, while other prices rise and fall over short time periods without much of a price change.

Net wealth is represented by the prices of assets minus the costs of liabilities.

However, net wealth doesn't fully capture real wealth.

For example, a new house may be really worth $300,000. However, its market price may be $250,000. Or the market price may be $300,000, but it's really worth $250,000.

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Morganovich, the market price is determined by the buyers and sellers in the market. Of course, it's subjective.

For example, if real income rises or interest rates fall, you can expect prices to rise, ceteris paribus.

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Morganovich says: "your notion that houses are worth $200k and sell for $150k has the underlying assumption that YOU know the real value of things."

If people don't know the real value of things, then who does?

At an auction with two people, one person may value a lamp, for example, at $15 and the other may value it at $20.

Who'll win and how much will he pay?

Who'll be happier, the one who paid $15 or the other who paid $15.01?

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Morganovich says: "you can value it at 15 and i can value it at 20, but the seller may value it at 25. thus, there is no transaction."

Or the seller may value it at 10 (for whatever reason), and then both the seller and buyer benefit enormously when the transaction takes place at 15.01.

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Mike, that would change the relative value of the house, compared to other houses, not the real value.

I wouldn't buy a $250K house if I believed it was really worth $200K. I'd buy it at $250K, because it was worth at least $250K to me.

However, if the market value of the house falls to $200K after I bought it at $250K, the real value of the house may not change at all, e.g. one-fifth of the house doesn't disappear.

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If a house is worth $300,000 to me, what's the probability I'll pay more than $300,000?

Zero.

What's the probability I'll pay $300,000 or less for the house.

A lot higher than zero.

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PeakTrader said...

Yes, however, Americans drive bigger autos and drive longer distances, from their big houses, while Europeans take mass transit or ride bicycles shorter distances from their small houses.

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Jon, lots of goods are much cheaper. That's why U.S. living standards are so high.

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Gasoline prices are high in San Francisco:

West Coast spike in gas prices tied to refineries
May 14, 2012

"Motorists across most of the country have been getting a break on the price of gas, but not on the West Coast.

The average price for a gallon of regular gasoline in Oregon was $4.17 Monday, up 16 cents from last week. The average was $4.20 in Washington state and $4.35 in California.

Meanwhile, the national average price dropped 5 cents to $3.73.

The West Coast switches to a more expensive fuel blend in summer to fight pollution, but analysts blame the current price spike on the failed restart of a BP refinery in Blaine, Wash., and maintenance work at several California refineries.

The BP refinery, the third-largest on the West Coast, produces 20 percent of Washington's gasoline needs but has been shut down since a February fire.

Meanwhile, five of California's 12 refineries — three in the San Francisco Bay Area and two in Southern California — temporarily reduced production because of planned maintenance."

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