The Consumer Price Index Does Adjust for Quality

March 9, 2008

6:15 PM

Robert Frank had a interesting column today in the NYT on the relationship between inequality and happiness. The article does include one serious error. It notes the problems of measuring inflation through time and claims that the consumer price index would not pick up quality improvements in products and uses the changes in a Honda Accord as an example.This is not true. The Bureau of Labor Statistics makes great efforts to measure and price in the effects of quality improvements. The process is far from perfect, but it is simply not true that prices are not adjusted for changes in quality.--Dean Baker

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