Inflation, It's Not What It Seems

It seems lately that I have noticed the rising price of many things, not just food and energy. What I have not noticed, or at least paid attention to, is the way certain prices have dropped.

There was a good story yesterday in the NYT that attempts to put these pieces together. I liked these stats:

• In 2003, a pound of hamburger cost all of $2.20. More than two decades earlier, in 1980, it cost $1.86, which means that the nominal price of burger meat rose only 18 percent over a period in which the nominal hourly pay of the typical American worker rose 150 percent.
• A decade ago, a basic four-door Toyota Corolla LE cost $16,018, according to the company. The 2009 basic model costs $16,650, and it’s a safer, more powerful, more fuel-efficient car than its predecessor.
• But combine the less noticeable trends with some true price declines, like a 5 percent drop in women’s clothing over the last year, and an inflation rate of 4 percent starts to seem more reasonable. Inflation really has gotten worse recently — it was only 2 percent a year and a half ago — but it’s not as bad as it feels.

Maybe the reason we are noticing the increase in prices is because we are used to prices falling and quality rising?