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How the government manufactures low inflation

February 9, 2004

Join Bill Fleckenstein this week on a trip to the government department responsible for fun with numbers. Maybe you are already familiar with the use of hedonic indexing of information technology and how it affects GDP. Well, now they are thinking about taking it further:

"the BEA is considering the use of hedonics to lower the impact of rising medical costs on the CPI by subtracting the imagined value of quality improvements in medical care from the price we’re really paying. The government recognizes it has a problem with exploding health costs and is studying the use of that same quick fix which has "worked" when unwelcome rising prices have been an issue in other areas, i.e., to define the problem away."

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