Inflation and Quality
Posted By Don Boudreaux On March 24, 2005 @ 3:57 pm In Prices | Comments Disabled
Suppose a hotel chain, such as Marriott, changes the sheets it uses on its beds from 200-count polyester/cotton mix sheets to 300-count pure cotton sheets. Suppose also that consumers respond positively to this change, allowing the hotel to increase its average per-night rate by $15.
How does this quality-improvement-related price hike factor into official calculations of the rate of inflation? How should it factor in? Virginia Postrel [1] offers a nice discussion in her column [2] in today’s New York Times – which closes with the admission by an economist at the Bureau of Labor Statistics that measuring inflation "is more of an art than a science, unfortunately."
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[1] Virginia Postrel: http://www.dynamist.com/weblog/
[2] her column: http://www.nytimes.com/2005/03/24/business/24scene.html
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