Departments February 3, 1997

Editorial

Don’t overstate how much computing costs shrink

Dan Strassberg, Senior Technical Editor

  You’ve probably heard about the government’s intention to get out from under the burden of cost-of-living increases for "entitlements," such as Social Security, by "proving" the Consumer Price Index (CPI) and the Gross National Product deflator overstate inflation.

  One of the areas on which the commission investigating the CPI is focusing is the cost of computers. The argument goes that, even though the prices of computers have declined for decades, these declines fail to state the true effect, because they fail to account for increases in computing power.

  Gimme a break! Only a bureaucrat with a vested interest in proving that the CPI overstates inflation could buy this argument. Virtually all of the last decade’s increases in computing power have been eaten up by software that requires more powerful hardware to do essentially the same job that less capable hardware used to do almost as fast. The user interface may look prettier, and the new software may offer some arcane bells and whistles, but factoring computer power into the CPI is a joke. If you could buy a brand-new 1984 PC/XT today, where would you buy the software to run on it, and where would you get support?

  According to one argument, you can pick up old software for old PCs at swap meets. The bureaucrats who insist that the CPI understates the decline in the cost of computing must love that argument! Usually, you pay little, if anything, for software you pick up at swap meets. If the software is free or nearly so, the bureaucrats can show that even their most optimistic estimates of the decline in computing costs understate how much costs have really dropped.

  There are a few problems with this approach, though. A lot of commercial software that you purchase at steep discounts comes without documentation, making it impossible to use effectively, if at all. Software publishers generally do not sell software; they license it. Li-censes are not transferable. So if you buy software at a swap meet, the legality of your copy is questionable, documentation and support are nonexistent, and you expose yourself to virus attacks. You might be able to run a 1984 spreadsheet on your 1984 PC/XT, but you need 1997 antivirus software to ward off 1997 viruses. Ever try to run modern antivirus software on a PC with only 640 kbytes of RAM?

  In addition, hardly any of that 1984 software accepts files created with modern software products that your co-workers are using. So, unless you live on a very small island, you won’t be very productive using your 1984 PC.

  You can’t stop progress, especially in computing. Arguments that increases in computing power result in understating the decreases in the cost of computing are simply bogus. The only valid cost comparisons are between typical systems in different years. The fact that the 1997 system has 25 times the memory, 50 times the CPU clock speed, and 200 times the hard-disk storage of the 1984 PC is irrelevant. The only relevant fact is that the 1997 system costs less than 40% of what the 1984 system cost (even less if you state the prices in dollars of otherwise-equal purchasing power). If the bureaucrats want to cut the growth in entitlements, that’s one thing. But don’t let them achieve their objectives by overstating the declines in the cost of computing.

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