jueves, 6 de diciembre de 2012

Todays consumption, Boskin Commision and Pensions




Some weeks ago I went to visit a friend of mine from the high school, Paco Caballero, he is an entrepreneur, and managed his own telecom office. We were talking and he said something very interesting, in our day, with the crisis unemployment, and so on so forth, everyone wants a iphone or other smart phone, everyone. 
Currently we are facing a deep crisis; however people do not leave to buy luxury goods. But what is expected to happen with the consumption pattern in such cases, first it is not the first time, so we have another ones like the cases of Argentina at the beginning of the century and what economist observe is that people buy less but go shopping more often, it means that people expend more time comparing products and prices, they get the most out of their money.
But what happens with the smart phones, well they are a product which combines many other, and their election could be more rational than we can think at first glance, because they represent a new set of opportunities, they are a new technology so we cannot compare properly with previous ones good. This is exactly one of the reason uses in the Boskin Commission to warn about how we consider the purchasing power though time.  The Boskin Commission studied the possible bias in the computation of the Consumer Price Index (CPI), which is normally use to reevaluate the salaries and the pensions, however these authors think that CPI should not be use because there are things like changes in technologies and changes in the pattern of consumption which affects the ways CPI is calculated thought the time. Although the Boskin Commission worked with data from UUEE it is easy to understand that affect to the whole world, and they pointed out that the CPI were positive bias, meaning that the CPI is a bad or unfair, indicator of the increase cost of leaving. Therefore, we should generate other indicator to do it. Something curious is that Boskin Commision estimate that the increase of cost of living was overrated around a 50%.
If we consider this ideas seriously, we can check the data and see that in our days, where pension are reevaluated taking CPI as indicator is unfair, and also that the salaries which are increasing half of the CPI are just increasing in an appropriate way (introduce reference), or the way more fair.
So I disagree to use the standard CPI to increases salaries, costs or pensions, and we should take advantage of this moment to do it a new and healthy custom for our future competitivity.


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