We commonly talk about tradeoffs, e.g., “if I do this then I will benefit in one way but lose in another”. We can do the same thing with price indexes. “In this respect things have improved but in this other respect things have gotten worse.”
Sure, but such an approach would deny the validity of all these “real” economic variables that are based on a scalar price index. In particular, it would definitely mean discarding the entire concept of “real GDP” as incoherent. This would mean conceding the criticisms I’ve been expounding in this thread, and admitting the fundamental unsoundness of much of what passes for science in the field of macroeconomics.
Moreover, disentangling the complete truth about what various price indexes reveal and what they hide is an enormously complex topic that requires lengthy, controversial, and subjective judgments. This is inevitable because, after all, value is subjective.
Take for example two identically built houses located in two places that greatly differ in various aspects of the natural environment, society, culture, technological development, economic infrastructure, and political system. (It can also be the same place in two different time periods.) It makes no sense to treat them as equivalent objects of identical value; you’d have a hard time finding even a single individual who would be indifferent between the two. Now, if you want to discuss what exactly has been neglected by treating them as identical (or reducing their differences to a single universally applicable scalar factor) for the purposes of constructing a price index, you can easily end up writing an enormous treatise that touches on every aspect in which these places differ.
Constant:
Sure, but such an approach would deny the validity of all these “real” economic variables that are based on a scalar price index. In particular, it would definitely mean discarding the entire concept of “real GDP” as incoherent. This would mean conceding the criticisms I’ve been expounding in this thread, and admitting the fundamental unsoundness of much of what passes for science in the field of macroeconomics.
Moreover, disentangling the complete truth about what various price indexes reveal and what they hide is an enormously complex topic that requires lengthy, controversial, and subjective judgments. This is inevitable because, after all, value is subjective.
Take for example two identically built houses located in two places that greatly differ in various aspects of the natural environment, society, culture, technological development, economic infrastructure, and political system. (It can also be the same place in two different time periods.) It makes no sense to treat them as equivalent objects of identical value; you’d have a hard time finding even a single individual who would be indifferent between the two. Now, if you want to discuss what exactly has been neglected by treating them as identical (or reducing their differences to a single universally applicable scalar factor) for the purposes of constructing a price index, you can easily end up writing an enormous treatise that touches on every aspect in which these places differ.