On the Accuracy of Estimating the Inflation Rate: Marty Feldstein as Dr. Pangloss

Martin Feldstein argues “that ‘true’ real output is growing faster than the official estimates imply and that the corresponding ‘true’ GDP price index is rising more slowly than the official one – or is actually declining.” In contrast, we argue that there is no real reason for such optimism. There are many negative developments that Feldstein overlooks such as subjective evaluations of well-being, incarceration rates, suicide rates, and the opioid epidemic. Moreover, he neglects completely the skewed distributions of income and wealth which leaves many families with inadequate savings and scrapping to make ends meet even if the average incomes grow. Feldstein overlooks also the many bite-backs of innovation such as the way the internet enabled foreign governments to interfere in the political process. In short, Feldstein’s view is Panglossian. He sees only the positives in technological change but fails to acknowledge the many negatives including global warming. As Stiglitz et al., suggest, “one of the reasons that most people may perceive themselves as being worse off even though average GDP is increasing is because they are indeed worse off (2010).”