ments made relative to a higher standard. These issues are the topic of current research on the measurement of experienced utility, which is arguably the most adequate measure for assessing the benefits of the material conditions of life.

As this selective discussion of the complexities of utility and satisfaction illustrates, the conceptualization of a COLI in economic theory is based on a very specific definition of utility, namely the decision utility revealed in choice. Decision utility, however, is a poor measure of utility as pleasure and pain, as conceptualized by Bentham. Yet little may be gained for the purpose of an index system by adopting a broader conceptualization of utility. Although measures of experienced utility would provide the most meaningful assessment of consumers’ quality of life, these measures would most likely have properties that make them undesirable for an index system. Most importantly, they may indicate inflation or deflation in the absence of any changes in the price of products.

TWO PERSPECTIVES

Theoretical Requirements

One difference between the COLI and COGI approaches is how much theory is built into each. The fixed-basket index (COGI) uses theory to choose the weights for the price index, but it takes very little theoretical background to explain to an intelligent but untrained bystander that a consumer price index ought to price the things that consumers buy. If one thinks of a COGI as the cost of things, one needs to know which things—to which the answer is, the things that people buy. Of course, this still leaves unanswered the questions of which people, when did they buy them, and what varieties of goods. The “which people” question is about the group for which the index is designed, whether one is concerned with individuals or aggregates, with a democratic or plutocratic measure. The question of when leads to questions of a Paasche (the comparison bundle) or a Laspeyres (the reference bundle) index. As already noted, the Paasche index is not feasible for a real-time CPI. If it is acceptable to produce indexes with a delay of (perhaps) 3 or more years, when data on the comparison period purchases will be available, and if there is little to choose between the two indexes on other grounds, it makes good sense to compute superlative indexes tailored to offer approximations to the COLI concept. The third question, about the varieties of goods, raises issues of quality, of whether a good is a simple irreducible “atom” on its own, or should be thought of as a bundle of characteristics. This question is perhaps the hardest to answer, and attempts to do so require a good deal of theoretical structure, in any framework. Indeed, current BLS practice, within a broad COGI framework, requires continuous judgments, many of which are based on theories of how consumers behave and of the relationship between quality and price.



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