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Quality bias is when changes in quality cause an inflation statistic to be inaccurate. This can result in either an overstatement or understatement of inflation rates. The following are illustrative examples of quality bias.
PerformanceTechnology that increases in performance far faster than in price. For example, a modern smartphone that is many times more powerful than supercomputers from the 1960s. The advance of technology is commonly used as an argument that inflation is overstated. However, you can't eat a smartphone and essentials such as food and housing can remain an inflation problem even if you have access to technology that would be worth billions of dollars 50 years ago.
The tendency for producers to decrease quality and product sizes as opposed to raising prices. For example, an inflation statistic based on 2000 consumer products that misses size or quality reductions in 200 of those products. LifestylesPeople may change their lifestyle in response to inflation. For example, average apartment sizes that decline rapidly in a city in response to a property boom. This can be missed by an inflation statistic based on the average cost for a "1 bedroom apartment."|
| Type | | | Definition | An inflation statistic that fails to account for changes in quality. | | Related Concepts | |
Economic Problems
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