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On the Accuracy of Estimating the Inflation Rate: Marty Feldstein as Dr. Pangloss

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  • Komlos John

    (University of Munich, Munich, Germany)

Abstract

Martin Feldstein argues “that ‘true’ real output is growing faster than the official estimates imply and that the corresponding ‘true’ GDP price index is rising more slowly than the official one – or is actually declining.” In contrast, we argue that there is no real reason for such optimism. There are many negative developments that Feldstein overlooks such as subjective evaluations of well-being, incarceration rates, suicide rates, and the opioid epidemic. Moreover, he neglects completely the skewed distributions of income and wealth which leaves many families with inadequate savings and scrapping to make ends meet even if the average incomes grow. Feldstein overlooks also the many bite-backs of innovation such as the way the internet enabled foreign governments to interfere in the political process. In short, Feldstein’s view is Panglossian. He sees only the positives in technological change but fails to acknowledge the many negatives including global warming. As Stiglitz et al., suggest, “one of the reasons that most people may perceive themselves as being worse off even though average GDP is increasing is because they are indeed worse off (2010).”

Suggested Citation

  • Komlos John, 2018. "On the Accuracy of Estimating the Inflation Rate: Marty Feldstein as Dr. Pangloss," The Economists' Voice, De Gruyter, vol. 15(1), pages 1-3, December.
  • Handle: RePEc:bpj:evoice:v:15:y:2018:i:1:p:3:n:10
    DOI: 10.1515/ev-2018-0029
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    References listed on IDEAS

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    1. Komlos John, 2016. "Has Creative Destruction become more Destructive?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-12, October.
    2. Temin, Peter, 2017. "The Vanishing Middle Class: Prejudice and Power in a Dual Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262036169, December.
    3. George A. Akerlof & Robert J. Shiller, 2015. "Phishing for Phools: The Economics of Manipulation and Deception," Economics Books, Princeton University Press, edition 1, number 10534.
    4. Congressional Budget Office, 2018. "The Distribution of Household Income, 2015," Reports 54646, Congressional Budget Office.
    5. Congressional Budget Office, 2018. "The Distribution of Household Income, 2014," Reports 53597, Congressional Budget Office.
    6. Komlos John, 2016. "Has Creative Destruction become more Destructive?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-12, October.
    7. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June.
    8. Easterlin, Richard A., 2016. "Happiness, Growth, and the Life Cycle," OUP Catalogue, Oxford University Press, number 9780198779988 edited by Hinte, Holge & Zimmermann, Klaus F., Decembrie.
    9. Martin Feldstein, 2017. "Underestimating the Real Growth of GDP, Personal Income, and Productivity," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 145-164, Spring.
    10. Joel Mokyr & Chris Vickers & Nicolas L. Ziebarth, 2015. "The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 31-50, Summer.
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    Cited by:

    1. Karl‐Friedrich Israel & Gunther Schnabl, 2024. "Alternative measures of price inflation and the perception of real income in Germany," The World Economy, Wiley Blackwell, vol. 47(2), pages 618-636, February.
    2. Thomas Mayer & Gunther Schnabl, 2019. "Reasons for the Demise of Interest: Savings Glut and Secular Stagnation or Central Bank Policy?," CESifo Working Paper Series 7954, CESifo.

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