AS WITH LIGHT, A LOT OF QUALITY CHANGES ARE NOT MEASURED. Nordhaus says: “In principle, it would be possible to link automobiles with horses so as to construct a price of travel, but this has not been done in the price statistics for just
the reasons that the true price of light was not constructed.” He gives other examples: “Similar problems arise as televisions replace cinemas, air travel replaces ground travel, and modern pharmaceuticals replace snake oil.”
Nordhaus in Table 1.7 (page 57 ) lists major inventions and identifies big quality changes whose benefits have not been taken account of in price indexes—-including long-playing records, radio, television; antibiotics (improved health status); and the convenience of zippers over buttons.
Nordhaus concludes that “the standard methodology of price indexes may be destined to capture the small changes but to miss the revolutionary improvements in economic life.”