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Tue Jun 23, 2020, 03:05 PM

DU economists: Is built-in obsolescence a kind of inflation?

In Adam Tooze's economic history of Nazi Germany, Wages of Destruction he describes the efforts of the finance ministry to keep a lid on inflation (or maybe currency depreciation?). One of the techniques they used was to intentionally create shortages of consumer goods. He describes the case of a shirt becoming slightly more expensive but instead of lasting three years it lasted six months. (At this point in the German economy, there was a surfeit of Reichsmarks in circulation but not much to spend them on so savings rose). (There would have been too many dollars chasing too few goods, but they fixed that by limiting the flow of goods).

Is this situation properly described a kind of inflation, or is it something else? Is deterioration in quality something that is factored into statistics that examine inflation?

In another hypothetical example:

More people are shopping online from a handful of companies. If companies make it so time consuming and difficult to replace or get refunded for a missing or damaged item that consumers just begin to factor in and write off the cost of missing/damaged items and reorder the item, is this something that is also looked at by economists? Does it have a name? (i.e., is this phenomena called something?)

Curious minds want to know. I wish I could hire an economics tutor to walk me through some of the discussion in Wages of Destruction because it's one of the most fascinating books I've ever read, but some of the financial schemes used by the Third Reich to postpone utter financial crisis ruin went way over my head.

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Reply DU economists: Is built-in obsolescence a kind of inflation? (Original post)
Mike 03 Jun 23 OP
Wellstone ruled Jun 23 #1
sandensea Jun 26 #2

Response to Mike 03 (Original post)

Tue Jun 23, 2020, 03:22 PM

1. Great topic,

while studying for my Process Engineering Major,we discussed this and accepted this as a true fact. First Job was at a Fortune 50 company,and yes,we designed stupid into many of our new so called innovative products.

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Response to Mike 03 (Original post)

Fri Jun 26, 2020, 01:49 AM

2. Not only that - but improved capacity/memory, etc. is calculated as "deflation"

At least for GDP purposes.

This little trick - i.e. calculating computer prices as going down 30% or so a year, simply because the average memory in a new model goes up by about that much annually (supposedly) - helps result in GDP growth figures that are 0.4% higher annually than they should be, on average.

The distortion is seen mostly in the Durable Goods component of the Personal Consumption Expenditures section.

Most other OECD countries don't do this. But Wall Street likes it, so it stays.

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