Re-conceiving Quality: Political Economy and the Rise of Hedonic Price Indexes

Prior to the 1960s most American economists rejected hedonic techniques as a solution to the problem of quality change in price indexes. I argue that behind that judgment lay a deeper conceptual divide over how best to define and assess product quality: through expert testing or through market price differentials. Most American economists working on price indexes at the time had ties to the U.S. consumer movement, which emphasized consumer ignorance and promoted expert analysis as the only reliable guide to product quality. During the postwar era, these ties began to dissolve, and as younger economists more readily accepted the market as an arbiter of quality, they likewise saw the econometric analysis of prices and product characteristics as a logical and unproblematic tool for handling quality change in price indexes.