William D. Nordhaus (1996): Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not: "During periods of major technological change, the construction of accurate price indexes that capture the impact of new technologies on living standards is beyond the practical capability of official statistical agencies. The essential difficulty arises for the obvious but usually overlooked reason that most of the goods we consume today were not produced a century ago...
...We travel in vehicles that were not yet invented that are powered by fuels not yet produced, communicate through devices not yet manufactured, enjoy cool air on the hottest days1are entertained by electronic wizardry that was not dreamed of, and receive medical treatments that were unheard of. If we are to obtain accurate estimates of the growth of real incomes over the last century, we must somehow construct price indexes that account for the vast changes in the quality and range of goods and services that we consume, that somehow compare the services of horse with automobile, of Pony Express with facsimile machine, of carbon paper with photocopier, of dark and lonely nights with nights spent watching television, and of brain surgery with magnetic resonance imaging. Making a complete reckoning of the impact of new and improved consumer goods on our living standards is an epic task.
The present study takes a small step in that direction by exploring the potential bias in estimating prices and output in a single area-lighting...
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