The Boskin Commission Report and its Aftermath

47 Pages·2000·0.12 MB·English

*htamretf Ast idn atrope Rnoissimmo Cnikso BehT
treb o.nRJodroG
ydtniasre vnirneUtsewhtroN
hcra ecsiem Rou naf oeolcraEunBoitaN
_______________________
*This research is supported by the National Science Foundation and a grant from the Institute for
Monetary and Economic Studies of the Bank of Japan. The evaluations and opinions contained herein are those of
eht rohtu aylno dna dluohs ton eb nekat ottneser peehrt weiv fo yna reh troebmem fo e h.t nnoiiksssoiBmmoC
snoitroP fo eht yrammus fo eht niksoB noissimmoC sgnidnif dna sti snoitcaer ot sti scitirc era detpada morfniksoB
et al . (1998). An earlier version of this paper was given at the Conference on the Measurement of Inflation,
,ffidraC ,selaW rebmetpeS ,1.9991
tcartsbA
699 1eh tf osgnidni fdn asisylan aeh tsezirammu sylfeir brepa psihT
,trop enRoissimm onCiksoB er ufedsotraaae rwMaeuorcTocMA
the Cost of Living. smsiciti rdc nsatnemm oec hstweiv enre h ttI
s d rnete se odrr e etsoioadhtufasvpentasawoepahsrRptipa
,I Pe Chnstieg n.a shmCsiciti rtcnatrop meir oe mhosttesnopser
htob esoht taht ere wdenn aelrpofeb eht tropeR dna esoht tahterew
d ndaeziramm ue sr,asnoitadnemmoc es rtoeitsnop s tear ranpi
hcraes etrnec efyroram m huat siswedulcn orce p .ae dpheTssessa
I ePsfhCuott attnser r eusnhctotnem m doencgan ayhtcil anuoq
. hcraes etrnemerusa eemci rfdpona
:sdrowyeK stcudo rwp e,negna hyctila u,qtnemerusa eemci r,pnoital f ni
LEJ :sedoC I1, I11
Introduction
cnis despale won evah sraey ruof naht eroM er o,mnoissimm onCiks oeB h ftnooitamr oef het
yllamrof ny odoiutstsSi mymrooCs i vedhAt" eta n eedyhSebttnio p"p,axe dencI irrePmus neohCt
ht ecnis despale evah sraey eerht naht eroM .5991 ,enFuJ ni eettimmoC ecnani s'noissimmo Cnikso Be
lanif report (Boskin et al , )6991 saw deussi no rebmeceD ,4 .6991 yB won eht'noissimmoC s
P remusnoC .S c.U eht taht noisulcno nria er yetpnecr e1 p .yn1boitalf ndietatsre v)oIP Cx(ed neIcir
1995-96 ytionu mtmnoecmer usd sennea taihedatmet tSneiihn htU htrtiaowibl iemma ofscaehb f
obaL fo uaeruB eht ,deussi saw troper oeht ecniS .seirtnuoc reht yldip adrev osm a)hSL Bs(citsita trS
ht fo tnatropmi tsom eht fo emots tnemelpmi o draw pe uhtta ho,tssnoitadnemmoc esr'noissimm oeC
.699 1n inah tyado tsse lyllaitnatsbu ss iIP Ceh tn isaib
ot nevig noitnetta citsilaTnruoj fo tnuoma suomrone eh eh tstcelfe rsgnidni fs'noissimmo Ceht
a ni tnemerusaem cIPC fo elor lartne feot ahrtwo reg h nts ia. ieAbus sciimono creoj aymre vtesoml
udorp dna tuptuo ni htworg fo setamitse laiciffo setantimatnoc IPC eh lae rdn a,emocn inaide m,ytivitc
ver xat tnemnrevog wfo setar htworg eht sretla ti ;sega dexed ne irtaa hstmargo rgpnidne pd snsaeune
evog eht fo htap emit eht rof secneuqesnoc rojam sah ti t;noitalfni o lanoit adn ntaicif etdegd utbnemnr
itse gnidaeldsim secudorp ti ;tbe noitalfn ieh tmoh wro fsrekamycilo pyrateno mro fnoitalfn if osetam
rate si a lacitirc ;tegrat ti strotsid setamitse fo ytrevop ;setar dna ti sduolc snosirapmoc foht e
. snoit afenocnamrofr ecpimono ceevitarapmoc
A noitcni tp sriadhs e hdt ehlci hsweus sciifitnei cds nlaacinhc eet hnteewt enbwa r edtbsum
C oissimmo fsonoitacilp mlianoitubirtsid edr nlaacitil oep hdt n,atnecr e1p . f1eotamit ssea isb t oint
issimmoC ehT .noitsulcnoc tah llar e sv rtodoinfuorgk claabcinh c eeyht lt tndooenniat ntorco pneor
saib e ta mtiutbse lared eeF hdtesaerc ndi asha itba hhtci h ywtbnuo mtas aev h ftsoetamit sse toisla
budg et tic igfneidkoo lkcab otni eht tsap dna dl ueoswaercn ieht tic igfneid kdoroalwro fotniht e
t, nrhe eiothdgkpaTnas emaPosRrBt2eitfA
fut ure. 1 T eh noitseggus taht eht saib dah desua cevissecx ehtworg ni laicoS ytiruceS dnaehto r
benef sti dekove a prahs dna gnin mlaadci t,inlooiptcaer sa eht PRAA na cniorietmaAi(cossAo f
R snosreP derite r e dtwsl aosoowrec thrs tgrfnooodCi rherghout cogrnhityr rsutcssiy bts)bntoeils
on esoht srotanes s edvniatatnes eorhpwer dah yllaitini ne ecbitehtapmys ot gnicuder ehtegdub t
ticifed noitaxe degnhnitits u jydba eh t,etamits esai bs'noissimmo Ceh tf onoitcar femo sy balumrof
s" dellac-o tnemev oem hgtniliar e ndeivisic etds osmpah r. enPoitaxed n oihtcaorp p "asXun iImPC
jda nfoitaxedni ro ra etysr ief hgtnir ufdles ttiicif eed h fteocnaraeppas isduolucar iem hst atwnemtsu
following eht esaeler fo eht s'noissimm o,Ctroper suht gnitanimile yna esnes fo ycnegruuoba t
.alumr onfoitaxed nei hgtnignahc 2
To htamretfa eht no repap sih e httuo braehtr ugfniht osny atsrop enroissimm onCiks oe Bhft
snoitacilpmi fo e he ttsaa m i ri.blotyafscceis liy of l spdeeart eianttr osnttnen iI eeschentuoscsio f
ediwdlrow eiht ot tseretn s'noissimmo Ceh tro fsisa blacinhce teh tylema n,ytinummo ctnemerusae m
irc eht e,saib fo setamits ev atha hstegna hec h,tesnops esr'noissimm oeC h,tsetamit seeso h ftmosicit
nekat . e e ,chgy eacntdn slra ininapahswelao ee c'ehaelsItntu ceePrqenrrCohiptser ,nteIchatf
redaorb a yb dekram neeb sah traoper eht fo htamretf e rd,onemata bseudoitnet n,s ossacueslnes noc
fo srebmem laudividni naht ,SLB eht yb stnemevorpmi fo noitatnremelpmi dipa thgi mnoissimmo Ceh t
ha detciderp eva .69 9,1rebmev o fNdoneke elwan itfa hrte vsonoisulcn olcan isf tdietarebil eyde hst
1. The Commission calculated that the 1.1 percentage point bias would contribute $1.07 trillion to the U.
S. national debt over the period 1997-2008 as compared to an alternative scenario in which Social Security and
rehto smargorp erew dexedni yb a alumrof hcih wdetcartbus eht saib morf eht dehsilbup.IPC
.2 ehT laredeF tnemnrevog tegdub ticifed no eht lanoitaN emocnI dna tcudorP tnuoccA sisabdenilced
from a peak of $280.9 billion in 1992 to $78.3 billion in 1996:Q4 to $0.3 billion in 1997:Q3 (all figures are at
annual rates). Since 1997:Q4 there has been a surplus in every quarter that has steadily grown to over $100
billion.
t, nrhe eiothdgkpaTnas emaPosRrBt3eitfA
dohteM dna hcaorppA s'noissimmoC niksoB ehT
immoC n iksoB ehT s’noit aen h ftnooitaula vleanret xeevisnet xtesr ief hdtetneserp enroiss
p r)16 9r1e(lg istuSo m ea shftatrwo pseuroiv e er;hpytru tdf n roaen ic aaheht rtsnocimitsit aetcsi
Commissio ,n na lanretxe noissimmoc fo strepxe tes pu ot troper ot eht tegduB uaeruBht( e
predeces sor fo eht eciffO fo tnemeganaM dna )tegduB no syaw ot evorpmi eht s’noitancirp e
semoS .scitsitat dnuorgkc albufe seudivo rspnoissimm orCelgi td Snnaiks oe Bhnteewt esbtsartn oc
niksoB eht gnitafulave esoht ro report and subsequent reactions to that report. The reports had one
.hto bn idevlovn isa wsehcilir Giv Zeta leh t;nommo cn igniht
Tnatropmi lareves erew ereh eli h,wI Pe Chytl ndoenrecn otcrop enriks o.e BsheTcnereff itd
ednI ecirP recudorP eht derevoc ttroper relgitS eh e. hlTl e swsaexed neici rlparutlucir gda n)aIP Px(
t fo yna ni sesaib rof etamitse laciremun yna ecudoSrp ton did troper relgit deweiv e trsiexed neici reph
utriv taht dedul(cnoc ti hguohtla saere h,w)sa idbraw p nusa aewre heter gdalu oswtsimono cle lyalla
dedulcni noissimmoC niksoB eht fto etadnam eh sa ilblare veo h fteotamit steni ora ponfoisivo repht
ni the CPI. ,seidu thscraes ewr ennoissimm o octtegd ulbaitnatsb udas anhoissimm orCelgi teShT
includi gn s’sehc isluiormGaf repap no cinodeh ecirp sexedni r,o sf,esleihbcoimloit)ru1Ga6(91 ,
whereas th oiss i smremosofn Cel pe txv rntpead ooee ratfigcolthasdxnlsueaib( mnmi okeCsoB n
srebme mot . )treeehmteg ot
niksoB srebm enmoissimm oC y bhcraese rgnitsix eeh tll agnilbmess af oksa teh tp udedivid
,scimedaca ,s rS eL ddBsniras enthiatho tda hne eebn orde vs oueohit v5e.3rspraey 3 n Igniodos ,
3. Especially important contributions included Diewert (1976, 1995), Gordon (1990), Griliches (1961),
Hausman (1997,1998), and Pollak (1981).
t, nrhe eiothdgkpaTnas emaPosRrBt4eitfA
fo eno morf yltaerg dettifeneb yeh s ahwci h,wnoissimm orCelgi teS h ftsonoitadnemmoc enri aem ht
th at eS t Lhad,hBceet c rrciaiesacun hc aeduawiths o raelrhperapcr er gydaf teoohisgleiarhuq n
w ylralucitrap p,seussi xedni ecir t aehztingo ctoentratro pstsmsiiieleht r.ee vdeaN cte sd eanhpithti
no desab elcitra yevrus a saw ytissecen fo troper noissimmtoC niksoB eh yr egvnidulc n,ihcraes etrs ap
dehsrilbupnu tnece ecau d toonrtepme r.ihu cqereha rTe rswfeeeoc rnun d aroaherth pt,asrgnid nif
tniop elt laf a moerihettvsoe gniyevru sylpmi sdnoye bo go tsrebme mnoissimmo Cdecro fsai bIPC
. hcraes esri hmto rsfnoisulcn olcacirem ut nugoniwa rohdtcraes etrsap
AimmoC eht fo tcepsa levon dsneairoge to7a t2c In ePiephCduti v soidatdowh tse'mnoiss
darapes a poleve mo rnfoitalopart xeem odseriuq es ri. hhTc are osfa iebgna hyctila u fqeotamit seet
seirogetac rof hci hhwcra edseetrsi x,e.g .lea( nsorserteuppmo cdna VT )stes ot deteailreorgetac s
nortcwele ,.g.e( detsixe hcraeser on ereh e h ftdoenialpm oecv ashrotatnemm oecm oesl i. h)Wsy octi
s'noissimmoC eht fo ersutan evitcejbu otta httl enfoissimm oeC h,tsa iebgna hyctila u fqtonemssessa
assum e taht eht saib saw yltcaxe orez ni seirogetac hcihw dah ton neeb eht tcejbus fouoiverp s
r estlus ee rhettalopart xos etahwci h,whcaorp psa'noissimm oe Chsetavitcejb ustsas us jahwcraes
fo .hcrae ser detaler ussi siht 4ot nruter eW e h ftsoeuqiti rec h fteom o nsgonitnemm once hwwol eeb
.trop enroissimmoC
simmoC niksoB dna relgitS eht Aneewteb ecnereffid lanif s nnso oa io iwn ttesiechohatwtetr
rw hcihw ,strope elbisi vylhgi hdn atrope rrelgit Seh tf oesa ceh tn ielbisivn iyllautri vdn ayek-wo lsa
and politically degra hnci eht esac fo e h nt.itkrsoopBer setc cnseeilrh feTnefirf iedgr atlrapht e
4. Nevertheless the Commission did not use related research indiscriminately and concluded, in the
absence of related information, that the quality change bias was zero in eight of the 27 categories.
t, nrhe eiothdgkpaTnas emaPosRrBt5eitfA
absen ec fo dexedni xat setar dna tnemnrevog stifeneb ni 1691 ni tsartnoc otehsilbatse-gnol d
noitaxedni ni ,6991 d nsdas aeten nreeeprh usatfqewoedasinaw on lcoeaihcttiut bidilnroatpsider l
iilpm 27 9e1cn ihstwo rygtivitcudo rwpo lfssora e5e y2h, to.s slnAoisulcn onciks oe Bhfstonoitac
had spurre d laitnatsbus cimedaca hcraeser no eht yalpretni neewteb cimonoce htworg na d
meas tnemeru srorre ,.g.e( ,sehcilirG ,)4991 yltaerg gnisaercni eht ssenerawa ni ehtimedaca c
.sgnidni fnikso Beh tf osnoitacilpm ieh tf oytinummoc
sgnidniF s'noissimmoC niksoB eht fo yrammuS
T oitces sih eso hrt otfrop enroissimm onCiks oeB h ftyoramm ufsei ryblevital esaredivo rnp
immoC eht fo yrammus a htiw nigeb eW .wti htiw railimafnu era oh d nI aPe C hfntooitpircs esd'noiss
the inher tne seitluciffid ni gnirusaem remusnoc ;secirp neht ew ezirammus eht'noissimmoC s
us tcudorp fo stcepsa gnivlovdni saib fo noissucsi snoisulcno cs'noissimmo Ceh tyllani fdn a,noitutitsb
reg gnidra sai bdetaler ot yti l,aeugqnahc w e,nstcudo rdpna lar esntecgepsa fo eht ytilauq foefil .
aga( dezirammus era SLB eht ot snoitadnemmocer s'noisSsimmoC eht yltneuqesbu er eehdulc x ee,wni
lop lacsif fao noissucsid yn e h fteo seu hgtnidrag enroissimm oeC h ftsonoitadnemmoc eer hdt nyaci
.) noitaxe d rnIoiPfC
The CPI and Difficulties of Price Measurement
aretil era erehT ?erusaem ot drah Wos gnivil fo tsoc eht ni segnahc era yh sdoo gf osnoilli myll
ram nredom ni elbaliaava secivres dn em ie thl tldaecudort ngini ee brsatcud o .rw speeNimono cteek
an d s dtnonaoe grse e ffce.foivt irie e dpt kevsarhar lateee emlhl,Rtidohewvo rsgpenmniiot sixe d
lonhcet ot esnopser ni ,elpmaxe rof ,yltneuqersf egnahc secivre st sgoncitce fsfraot craef h dtlnoaacigo
t, nrhe eiothdgkpaTnas emaPosRrBt6eitfA
and ,yt ihlcai u hsqswrdeameuls nootc egn arhi c e.ghsntniryeutbta p sA ew ev aehmorceehbcir ,
demand has sc isftdos o isnd,o yre aesg maec dtdyowtionfolracv taiogfarohgnretsiasshacercni d
om ,ytilauq decnahne ssa hcus secivre tni otpsr iyfr ee vh,te c.n eecHneinevn orcetae rd gnyateir aevr
the CPI Com noiss iemdam ni sti troper saw tnaohittalf n ysitliltunceirfefh inodit erusaem ni a
a si SLB eht fo margorp IPC ehT .ymonoce tekcram cimanyd xelpmo evisserpm idn axelpmo c,egra l
. slanoissefo rdpetacid e yddbeffa t,sgnikatrednu
gninifeD noitamr otfanhiw yramm ulslare vnnoaiat boteo t isow utod hndae ednlu oewno
noc ni egmnahc ro/dna level eht fo erusae .serudeco rd pnsanoitpmus ssauoir asveriuq esreci rrpemus
Twsna ot noitseuq tsrif eh ” ?ed heTrev o eocsbterutidnep xreemusn ofncoiam oe d hsttiah wsr“ie
Cc no sesucof margorp IP elbasops iddlohesu oft housoecivr ed snsado onsgoerutidnep xreemusno
income. ,ecneH t its,eeyk dtrruiaelv mdciy-axttnoecioralnbauq fo ef i,lseuss idna eht stsocna d
.smargo rtpnemnrev otgs ofsmotifeneb
Second, eno sah ot enifed eht secirp fo hcihw seitidommoc dna secivres eno stnawt o
measure, woh ot erus a,emmeht woh ot tcell oactad no ,meht revo tahw naps fo emit dna taahw t
a ereihw ,lavretn lla rle a v or eom teenernvtohoieat s g , de wa tnreotocag hhat egnt ddlaeonlhtowc
summary .scits itat stA hs cn saottei sn tsfue d,puomme nsmogsealuidebe sruhvesajtedavlami n
order to ma t tlsiatwendemevo rdpemtise gs g'.unysoai w sedls maai foecmeoShimht otceCakrp h
v suoira dl e shtia htteks atbekr anmev ira gosfthgi edwex i ffeo seu h sthac ussnoitpmus sease hfto
.e rerodom a r cdoaeefdxif
The SLB stcelloc ecirp snoitatouq no 000,17 sdoog dna ,secivres ta tuoba 000,22iater l
outlet s, rehtie ylhtnom ro .ylhtnomib lanoiti dndoAitamrofni si deniatbo no tner dnasrenwo ’
t, nrhe eiothdgkpaTnas emaPosRrBt7eitfA
gniyap era srenwo hcum woh ,si tahet -- tner tnelaviuq secivr egsnisu or hosfmr etts oyctinutrop pnoi
yreve stinu latner 000-,53 tuoba morf - tnereff ir dosfthgi ee whetdac er deepc nt ou.o sbhAtn ox mis
commodities era devired morf eht remusnoC erutidnepxE syevruS .)SEC( tA eht emit foht e
s'noissimmoC report e nrs oeud4whn8ta- 2 e8fg9oa 1r deene vhose atarsbetwhg ie,eh6 wt9n9i1
,8991 ,yraunaJ nI .etad afo tuo sraey 31 egarev eht SLB detadpu eht sthgiew ot eht doirep,59-3991
.et aftd ousora eeyv infa hetr oemgare vnwa o oyen brhacihw 5
Toitcelloc ecirp IPC eh e hsp .tioe sthtstAeco rlpadimar yrlpoacihcrar e hiaghuor hste ong
fo erusaem yrammus llarevo eaht -- IPC meti-ll .htn oohmttn ommo rsfeci rrpemusn onecigna hecht
txeN semoc a llams rebmun fo daorb ytidommoc spuorg hcus sa ,gnisuoh doof dnasegareveb ,
.rehto dna tnemniatretne ,erac lacidem ,noaitatropsnart ,lerapp dedividb u sssieiroget aecse h fthocaE
into oth re .seirogetac roF ,elpmax egnisuoh si dedivid otni ,retlehs leuf dna reht o,seitilituna d
dlohesuoh sgnihsinruf dna .snoitarepo hcaE fo eseht seirogetacbus si dedivid llits ,rehtruf.g.e ,
ddeb dna erutinruf sa hcus seirogetac otni shgnihsinruf dlohesuo lev etlsew o el. hcT t,esecnailp p,agni
etaluclac si xedni na hciohw rof noitagergga f .mutar tmse t nidaell a scsieto ueqci rgpnitagerg g yadb
detcTelloc atarts meti 702 era ereh w o.l seeBxed naitar t8s01 ,og9tnida e,lsae rlaacihpargo e4ng4i
eht s lma yee tervtarteiranltes eci rcpis a eb. hdTelpm aes rsatcudo rcpifice phsci hmwo r,f)s’ILE(
quotes , st le ot ec s ns nvisefedoeviiownlrhtoa etils d eolrm aamnuootcca aggregate or ELI. For
egr aelk i,lez ids neap yctifice psasy ueb n”o,selpp ay“ udb nearo toast n oitg’nse oed n,oelpmaxe
red . sn ,ead elhe rpt se o p aeahsfa nnchteeaioicirtJrrteapuih dpdTlnoaomumtocca seca lspuoirav
.5 noi tdApe ilfr iocyasgteoe dldI oPd dCesonihitae tmnnioc S.L)B2991( sni ohsiTrtecfees rot ehtIPC
sda ey c gtdeuso ievd tlnraosn oeu hraendesn.twmiobai6neh e9ivtsm9oeu1 rm o,pdrwmeeoism lsuseunAbcsid
since 1996, including plans for much more frequent updating of the upper-level weights.
t, nrhe eiothdgkpaTnas emaPosRrBt8eitfA
.sele gssnneoiAlL pr,po.a fg,.seexe dantia renthist a dtoebttoage r tgesgbuam
steltuO era nesohc dna detator yreve evif sraey morf es aahcruP -yfeov-rtunSioPSPOP( )
asking sremusnoc erehw yeht esahcrup sdoog dna ,secivres h tsiewitilibabor pfo teltuooitceles n
proportio lan o.tserutidnepxe ehT secirp era detcelloc dna derapmo cnihti w.steltuo nihtiWht e
o teltu ,sel a osltanoitropo rnpoitcel e fsyotilibabo rhpt i,wsme tciifice p nssoeci rsptcell oSc LeB h,t
a eht secirper dn ,shtn oemvissecc u nskico t nsti o snmie teim aes hnte t. fsOra eeyv irf omfe teimas
b atsum tnemgduj a dn detutitsb ue s hnstiecnereff i, d of;sit ormnoe teilbarap m eoacci roeptd aem
item s e rdae t,odnn as tsn a e dem,e rtwt.asooeulndjeadbma tlAa u mde eihltvt eiievdrenelihti s
rylhguo rehto nrao/d nmae triehto n yadbecalp e erlbl imwe t nitaa hrta ehyc aeecna htcnecr e 0pa2
o occa oN .teltu ht idwetcep xetebhg is,masep yttelt usosor cnaoitutitsb ufnsoek aytlticilp xsteinu
.sra etynec ensriero ttsnuocs ife dosduaerpsed io,wtelpma xr eo,fgniliat efnrooitulo veeht 6
gInitaluclac n e,hstet oeucq isfriop s easnhbeottager gxgea denci iartpa rltes vtesle w eohlt
d ata o,t99 9,1yraun anrJievoegna he chltit nsuna ecmitemhti rftaonai r gaanvi sduetagerg gearew
ge cirtemo n o i s tsnofaiaiod hes nstmsnee a(iihmet wmktmlnemsoga hoocntttCBeirsrsoopmmi n
which was a detpecc dna yldipar detpoda yb eht .)SLB citemh tnioriAtagergga sawllacirotsih y
def dedne tn e sthastiisw neoh ctd setaxhl igudfimeerswouf ta e hrte hl.genivoheil tfaog erggaI n
tiw noitutitsbus on saw ereht taht dsemussa saw ti ,troh dedulc nyie hnte hnwe v,eseiroget aecse hntih
smeti gn ohmc aiehrweht s iylek i ,lonto ihtc uueetsbsi ntsesa mbsmueispyt f, osseellpyptasna d
cs’nem fo srolo noitpmusn onncioitutitsb ufysoticitsa le ehtta hetm u. s nosdo osanTsatri hssse rd
6. This description describes the pre-1998 rotation procedure and does not reflect the more rapid and
, ne dd omeeeewiect blothnpsiblacioariet ssdcxbonaseri el ndf.eoshittt ncnteeonmse ecIvePorCrpmi