The dominant narrative of contemporary political economy holds that advanced economies have experienced decades of stagnating real wages and rising inequality, with the gains from technological progress accruing to a shrinking elite. This paper argues that this narrative rests on a statistical measurement illusion. Conventional national-accounts and consumer-price methodologies — designed for a mid-twentieth-century economy of standardized physical goods — systematically fail to capture the value generated by quality improvements, dematerialization, and the creation of entirely new goods and services. We develop an attribute-based framework that reconceptualizes economic output as a flow of services from evolving bundles of characteristics rather than as quantities of nominally identical goods. Applying this framework to housing, durables, digital goods, and healthcare, we show that real living standards have improved far more rapidly than official statistics suggest. The consumer surplus from new and improved goods is economically equivalent to an expansion of real consumption possibilities: a worker with access to free navigation, global communication, and unlimited information commands a greater set of feasible choices than one without, even if their nominal incomes are identical. The paper challenges the inevitability of Baumol’s Cost Disease through a comparative analysis of two U.S. hospitals and a high-volume Indian tertiary-care center, showing that when institutional frictions are minimal, medical technology achieves substantially lower costs than prevailing U.S. benchmarks. The findings suggest that much of the “inequality crisis” reflects a crisis of measurement rather than a decline in real living standards.
Claude Opus 4.5, ChatGPT 5.2, Gemini 3.0
1) Category: Research preprint (as declared by author). 2) Aims: The paper aims to demonstrate that conventional economic measurement systematically understates real income growth by failing to capture quality improvements, dematerialization, and new goods creation, arguing this explains apparent wage stagnation. 3) Correctness: No errors identified. 4) Coherence: Adequate. 5) Consistency: Consistent. 6) Semantic opacity: Moderate (Justified complexity). 7) Novelty: Reformulative. 8) Bibliography: Adequate. 9) Effectiveness: Achieves aims. 10) Cross-framework traction: Medium. 11) Claims: Supported. 12) Contribution: Substantive. 13) Structure: Adequate. 14) Integrity: No issues. 15) Code (if provided): Not provided. 16) Editorial outcome: Suitable for inclusion as a research preprint. 17) Authors list: ["Franco Cazzaniga"] The paper presents a comprehensive framework for reconceptualizing economic measurement through an attribute-based approach that decomposes goods into quality, dematerialization, and risk-reduction components. The theoretical foundation is mathematically coherent, building systematically from Lancaster's characteristics theory and Rosen's hedonic framework. The empirical applications across refrigerators, automobiles, smartphones, and healthcare demonstrate measurable magnitudes for each adjustment component. The healthcare case study using Time-Driven Activity-Based Costing provides particularly strong evidence for institutional friction effects. While the core argument about measurement bias reformulates existing insights from the Boskin Commission and subsequent literature rather than introducing fundamentally new concepts, the unified theoretical treatment and systematic decomposition represent a substantive contribution. The paper maintains internal consistency across its extensive technical apparatus and successfully integrates diverse empirical evidence to support its central thesis about the systematic understatement of real income growth.
In preparing this manuscript, the author used AI assistants (Claude, ChatGPT, and Gemini) as research and editorial tools. These tools assisted with literature searches, provided feedback on expository clarity and structural coherence, and helped refine the presentation of arguments. The author was responsible for conceiving the central thesis, directing all research inquiries, selecting and critically evaluating sources and evidence, developing the theoretical framework, and exercising full editorial control over the final text. All substantive intellectual judgments—including the interpretation of findings and the paper’s conclusions—are entirely the author’s own.