"A Honda Accord cost $12,000 in 1990 and it costs $25,000 now.
A Mustang was $9,000 and now it’s $27,000.
The BLS has new car prices close to unchanged over the past 30 years."
Whatever you think of the validity of "hedonic adjustments", this is certainly not what I would expect when BLS reports car prices as unchanged during that period.
That’s not even mentioning the leaps and bounds in efficiency and safety. I’d argue cars have gotten effectively cheaper over the years, as they’ve dramatically improved in every respect. If you could still buy a 1990 Accord manufactured today, it would probably sell for a couple thousand dollars.
Edit: as for the Mustang example in the grandparent post, that $27,000 Mustang of today outperforms entry-level Ferraris of 1990. A fully-spec’d $80,000 Mustang of today would outperform every Ferrari from 1990, including the F40, which sold for $400,000 in 1990 dollars (~$800k in today’s dollars).
So if anything, the CPI doesn’t implement hedonic adjustments enough for cars.
Remember, 1990 is still the era of the 5 digit odometer. Cars have gotten hugely more reliable over the years. A 2010 car hitting 200k miles is routine and expected; a 1990 car hitting 200k miles would be exceptional.
Also, no 1990 car would pass modern safety standards. Few would pass emission standards. A big reason for the increase in engine performance (and thus complexity/cost) is due to the weight of all the safety equipment that’s required today.
You said it yourself: cars from the 1990s might last 100k miles! You think a poor person today is going to buy any used car that has 100k miles of life left? I highly doubt it.
As for the safety and emissions standards- you're right. That's a big part of what has driven up the price of cars. And while I know that they are less safe, were they really that unsafe? I mean, the 90s had airbags, seat belts, ABS brakes (at least some models). At the end of the day, I'm not saying I would be happy that a poor person could only afford the safety of a 1990s car. But what I am saying is that it's still better than what they have access to today. Ideally, we just wouldn't have people so poor that they can't afford safe transportation.
For emissions, specifically, I don't want poor people to have to pay the cost of saving our environment. I know a bunch of people who are financially comfortable enough to have multiple cars and/or recreational boats- let them pay for it. I'd be fine adjusting my wish to "1990s standards car + modern emissions standards, as long as the government subsidizes it such that it still would cost 1990s prices".
Further, if the reality is that a 1990 equivalent car cannot be purchased today - then the consumer who could only afford the 1990 accord will instead buy used. Is this person going to feel wealthier than they did in 1990?
Hedonic regression actually quantifies the expected year-over-year price changes due to quality changes. It doesn’t give automakers carte blanche to increase prices, because a year-over-year price increase without quality increases commensurate with previous years will increase the residuals of the regression prediction for the current year.
> Is this person going to feel wealthier than they did in 1990?
Yes, because a 10 year old car in 2021 is still leaps and bounds better than a 1990 equivalent new car. Drive a few miles in a 2010 Civic (an entry level car), then drive a few miles in a 1990 Accord (a midrange car). You’ll be amazed at how much better the 10 year old Civic is in every aspect.
Cars from this era were far easier to work on than those made more recently. That's one reason I keep buying old. So it's not obvious that buying a newer car which is more difficult to fix, and may have to get taken to a mechanic or the dealer is a better deal than an older one which I can fix myself, even if the older vehicle needs fixing slightly more frequently.
Viewed this way, newer cars are both more expensive and provide worse value than cars from previous eras.
Why stop at the 90s, lets look at the early 19th century. The early Model T was $20k inflation adjusted. A modern car would have been millions.
For some goods like cars and electronics, yes. For other goods and services (e.g. education, healthcare, childcare), no.
Have a look here to see which goods’ prices have inflated, and which have deflated: https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas...
High car and house prices are what you get when you have unprecedented close-to-zero interest rates for this long.
Prices = f(interest rates, affordability)
I would be wary of this statistic, because it could just mean that only people with leasing plans are buying new cars, and everyone else is buying the cars coming out of lease (which makes sense financially, a car loses something like 30% of its value in the first two years?)
To take a European example, a 1990s VW golf is smaller and slower than a 2020 polo.
The Guidelines for Quality Adjustment of New Vehicle Prices are at https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf.
New Vehicle CPI has increased 22% since 1990 (https://data.bls.gov/pdq/SurveyOutputServlet).
“BLS adjusts for structural and engineering quality changes such as:
• Changes that affect the safety of occupants of the vehicle as mandated by legislated federal or state standards, and for purposes of IPP export items, applicable foreign market standards. Changes in safety features not required by legislated standards will be evaluated on a case-by-case basis.
• Changes in mechanical or electrical features that affect the overall operation or efficiency of the vehicle, or the ability of a component to perform its function, such as changes affecting steering, braking, stability, engine horsepower, traction control, transmission, battery life, and fuel systems and/or electrical systems.
• Changes in design or materials that affect the length of service, durability, need for repairs, or strength or performance of the item, such as stronger bumpers, HID headlamps, flexible body panels, platinum-tipped spark plugs, or warranty changes.
• Changes that affect comfort or convenience, if supported by evidence of a functional or software improvement, such as redesigned seat belts, remote door locks, theft deterrent systems, navigation and communication systems, satellite radio hardware, drive assist systems, backup cameras, sensors or changes in storage capacity.”
https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
3. What items in the CPI are hedonically adjusted?
The CPI uses hedonic quality adjustments in item categories that tend to experience a high degree of quality change either due to seasonal changes, as in apparel items, or because of innovative improvements and technological changes, as in consumer appliances and electronics.
For all intents and purposes (i.e. going by the Wikipedia/intro to macroeconomics definition), any form of accounting for changing quality of goods in inflation indices is a “hedonic adjustment.” The BLS distinguishing between “hedonic adjustments” and “cost based adjustments” (the latter of which they do not define) seems to be something specific to them. And the PDF actually describing their methodology for adjusting car prices sure reads like textbook hedonic adjustment to me.
But deceptive things should be doubted.
https://www.bls.gov/cpi/factsheets/new-vehicles.htm