The Hedonic Porsche

No, they’re not rigging the CPI.

            My new car inspired that bizarre thought, on a fast run from Las Vegas to Santa Rosa in New Mexico. On an open road, surrounded by beautiful countryside and little else, I put the pedal down to see if my turbo-charged New Beetle was as responsive at high speeds as at low speeds.

I giggled as the spoiler light went on. I had forgotten what the dealer had told me months earlier— a little wing rises in the back when your speed exceeds 90 miles an hour. I hadn’t driven that fast before.

This is not your fathers’ Volkswagen.

Indeed, it isn’t remotely like the VWs I owned and drove through the sixties. Those cars took me to work, hauled construction materials, and took me all over Europe. They were simple, fun, and reliable. The first, a regular beetle purchased in Munich in 1962, cost about $1,300. The last, a red convertible, cost just $1,700 in Paris in 1966.

If you’re a real nostalgia freak you can still buy one of those cars because they continue to be manufactured in Mexico for less than $10,000. You won’t be able to bring the car into the United States, however, because it won’t meet our emissions standards. If you’re an ersatznostalgia freak, you can buy retro New Beetles starting at $16,000.

Which brings us back to the Consumer Price Index— and whether the folks at the Department of Labor are rigging it.

From 1965 to the present the CPI has risen about 560 percent. A basket of items that you might have cost $100 in 1965 now costs about $560. A Beetle that cost about $1500 in 1965, however, now costs more than ten times as much.

That’s a lot of inflation. It makes you wonder if the Department of Labor is cooking the books.

In fact, many products have improved and keep improving. Comparing the price of this year’s product with last year’s product isn’t a good way to measure inflation because the product is actually different. “New” and “Improved”, so to speak.

Enter hedonic analysis.

Based on the idea of actually measuring what we experience and rooted in the utilitarian philosophy of Jeremy Bentham, economists at the Department of Labor now use hedonic analysis to separate improvements from inflation, witness papers on their website describing hedonic measurements for refrigerators and video cameras.

Me, I’d rather do the more direct hedonic analysis.

In the sixties I hungered for a Porsche but could never afford one. The famed 356 had a number of versions, but the last was the 356 Carrera. Priced around $5,000, the car featured a two-liter, 4 cylinder engine with 130 horsepower. It had a 4-speed transmission, 4-wheel disc brakes, and a top speed of 125 miles an hour. It would do 0 to 60 in 12.8 seconds. According to the CPI, the same car should cost about $28,000 today.

In fact, the current Carrara costs over $70,000 (PRICE) but you can get a Boxster for about $42,000. That’s way ahead of the consumer price index.

But the luxed-out turbo version of the New Beetle, which comes off the showroom floor for about $21,000, offers a 1.8 liter, 4 cylinder motor with 150 horsepower, a 5 speed transmission, 4 wheel disc brakes with ABS, a top speed of 124 miles an hour (governor limited), and it does 0 to 60 in 8.2 seconds. Indeed, the dieselversion of the New Beetle, will edge out the old Carrera with a 12.5 second 0 to 60.

Other hedonic items not available on the old Carrera include: air conditioning, traction control, power windows, front and side air bags, cruise control, radial tires, somewhat more rear passenger room, and a larger trunk.

Not to mention the spoiler.

Measuring the Hedonic Porsche

Sources: www.carpoint.com;www.356registry.com

So lets do the math.

A loaded turbo New Beetle costs about 75 percent as much as the inflation adjusted price of the original Carrera— but offers better performance, superior safety, and more amenities. That’s deflation.

I’m not driving a New Beetle. I’m driving a Hedonic Porsche.

On the web:

Check the CPI calculator

(c) A.M. Universal, 2001