Well now. I harbored my suspicions about Commerce's numbers; glad to see I was at least partially right.

Still, you should note that the gap of $209.5 billion in the actual vs. hedonically adjusted figures is about 2% of GDP. The problem with hedonic price adjustment for IT is how much of the raw gains in computing power are actually used and for what? IT equipment only radicalizes what has always been the case in advanced industrial capitalist economies, that the productivity of capital equipment rises even as the price declines, due to technical innovations and productivity gains in the capital goods sector. This is ultimately the prime source of real economic growth. Older GDP figures probably slightly underplayed this factor, whereas hedonic price adjustment probably overplays it, (though that would depend on the technical details of hedonic adjustments and exactly how much they are allowed to effect the raw data). At any rate , the final proof in the pudding would be in the gains to final consumption output in terms of real prices and wages/salaries, that is, increased real income and decreased real prices.

How does hedonic adjustment vary from country to country? How much do variations in methodology affect international comparisons?

If hedonic price adjustment has inflated the GDP by 2% as Mr. Halasz says above, then GDP-based rates are understated by an even greater amount. For example, the current health care GDP is supposed to be at 13.9% of the total economy, but if the "adjusted" GDP is 98% of the "real" GDP, then the correct figure is 14.2%.

A $64Bn Gorilla At The Fed (Sludge Report) provides another quite interesting set of numbers. It seems that the M2 and M3 money supplies have been dropping significantly over the last quarter, and that this is unprecedented going back to the early 80's for M2 and the late 50's M3. What this means, no one is yet sure. Worth reading though.

Please provide an explanatin for the strange bottom scale used in the graph. Why do '91, '94, '97, and 2000 each appear twice?

Cy guy,
The graph seems to be made up of quarterly data points, which makes sense as that's how GDP is reported.

The graph software is likely labelling via a non-quarterly-divisible periodicity, (if that makes sense)...hence the repeated "year" for every three years of data.

Patrick-- you have it exactly right, as Billmon confirmed to me by email.

For an alternate view on this see my post at Economists for Dean

Is Growth Real? That is funny is'nt it. First it is such a terrible economy because of President Bush and his evil tax cut and our hero Howard Dean says he will fix the problem by raising YOUR taxes. Now, (pause to laugh), the recovery is not real. I also heard just yesterday that some Democrats believe the growth is real but it is growing too quickly. My bussiness has just picked back up in the last month (thank god), and so I say yes yes yes the recovery is real. You hard line democrats are too easily conned. Why not just simply be honest with yourselves and elect the man who is doing a good job or is the best man for the job rather than shoot yourselves in the foot because you so badly want a man with a D in front of his name to be in the Whitehouse. Check out http://www.politicallyrighton.com and you will possibly learn something that will change your life.

"My bussiness has just picked back up in the last month (thank god), and so I say yes yes yes the recovery is real"

Your business is doing well so the economy must be doing well? You're kidding right? Do you have any idea how big or diverse the American economy is? Are you aware there are sectors of the economy than ran from 1945 to 1973 with no recessions, despite the fact that the national economy saw several recessions at that time? To take an example, my father is a self-employed photographer, and he works in a sub-category of photography known as the "stock industry". The stock industry saw steady growth, with no recessions, from 1959 to 1982. Because the industry is somewhat counter-cyclical, the industry saw especially fast growth 1973-1982, which was a rough patch for the overall American economy.

I've a good friend who builds residential housing and he's been delighted with the economy for the last several years, even when it was formally in recession. Of course, the nation has been going through a historic real estate bubble, despite the recession.

Your personal experience of the economy doesn't tell you a damn thing about the economy in general. This isn't Jamaica - the American economy is too big and diverse for anyone to experience it personally.