Quick Question

by Don Boudreaux on November 13, 2013

in Creative destruction, Data, Growth, Seen and Unseen

… and it is indeed a genuine question – namely, how are the consumer-welfare benefits of innovations such as single-cup (“Keurig”) coffee makers measured?  What effect(s) do such innovations have on calculations of inflation or changes in per-capita GDP?

love my Keurig coffee maker.  It’s far more convenient, faster, and cleaner than were the conventional electric drip coffee makers that I used previously.  Also, Keurig results in less wasted coffee, and permits more nuanced and precise catering to differing tastes in coffee (or tea).

I like strong, full-bodied, and naturally flavored coffee; a recent house guest preferred light-roast coffee with hazelnut flavoring.  I fixed myself my preferred type of coffee and fixed for my house guest his preferred type.  In 2010 or earlier, I would have brewed just one kind of coffee and both of us would have shared that one kind of coffee.  At least one of us (me, in this example) would have not enjoyed his coffee that afternoon quite as much as he did with my Keurig in service.

In what ways do the advance that single-cup coffee brewers surely are show up in official measurements of economic performance and well-being?  It’s not clear to me that such advances do show up as clearly as they should.  Indeed, it’s conceivable that such advances have perverse effects on official statistics, causing them to suggest that consumer welfare is decreasing when, in fact, it is increasing.  (For example, if the average price of single-cup brewers is $119 while the average price of conventional coffee makes is $59, the advent of the single-cup coffee brewer makes it appear that the costs to consumers of brewing coffee in their homes has risen.  In fact it hasn’t.  Consumers could still buy the conventional coffee makers for $59 each but choose instead to buy lots of the single-cup brewers for $119 each.  For the consumers who make this choice, the additional $60 expense obviously is worthwhile; those consumers are better off.  But do the data reveal this reality clearly enough?  Or do the data hide this reality?)

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